It’s Easy Being Green

MARKETS

That Was a Nice Thursday

”Let’s not get carried away again,” lol.

Yesterday, we didn’t talk about what happens when the initial jobless claims number comes in below the consensus forecast.

In this context, it’s a “beat,” and it’s fuel for a 2.30 percent rally for the S&P 500.

All the other indexes joined in: the Nasdaq Composite was up 2.87 percent, the Russell 2000 2.42 percent, the Dow Jones Industrial Average 1.76 percent, the S&P/TSX Composite 1.58 percent.

Some will say it’s sort-of a no-no to quote the CBOE Volatility Index $VIX in such terms, but the “fear gauge” was down another 14.93 percent.

And an ominous pre-market “spike” to 65 on Monday may not have been all that anyway. The CBOE VIX Futures $VIXF didn’t confirm and only went as high as 37.

So we’re no longer surging toward recession, at least with regard to this data point.

The US Department of Labor reported that initial claims for unemployment insurance declined by 17,000 to 233,000 during the period ended August 3, 2024.

We may be scratching the surface, though. JPMorgan Chase & Co. $JPM says such a downturn is more probable now.

And we did discuss the fact that “we must consider the ‘R’ word” in the August 2 issue of StockPick Daily.

As gripped by fear were investors, traders, and speculators to open the week, let’s hope we don’t swing too hard the other way as we end it.

It’s relatively quiet on the earnings front as another reporting season winds down. Nvidia’s $NVDA release of its fiscal second quarter results after the closing bell on August 28 is next on the horizon.

And there is no incoming data today.

Price action will probably reflect positioning ahead of the release of Consumer Price Index data for July by the Bureau of Labor Statistics before the opening bell next Wednesday, August 14.

It’s All Clear Friday. Let’s hope it approximates normal.

DEEP DIVE

So Let’s Say There’s a Recession

“We would be OK,” according to Jamie Dimon.

“America is alive and well,” JPMorgan Chase & Co. $JPM CEO Jamie Dimon said on CNBC this week amid his annual bus tour of the Midwest.

“There’s entrepreneurs everywhere; people are optimistic,” he said.

That doesn’t mean analysts at his bank can’t raise their forecast for the probability of a recession this year from 25 percent to 35 percent.

Dimon is even more skeptical than that, and he has been for a while.

“There’s a lot of uncertainty out there,” Dimon said during his conversation with CNBC’s Leslie Picker. “I’ve always pointed to geopolitics, housing, the deficits, the spending, the quantitative tightening, the elections, all these things cause some consternation in markets.”

Dimon set the odds of a “soft landing” for the US economy at 35 percent to 40 percent. So does that mean 60 percent odds of a recession…

“We don’t know if it’ll be a soft landing or hard landing, or all the things in between,” he said. “There’s always a large range of outcomes.

“I’m fully optimistic that if we have a mild recession, even a harder one, we would be OK.”

The Federal Reserve Bank of Atlanta’s GDPNow model, updated on August 8, 2024, shows 2.9 percent annualized growth for the third quarter.

We’ve seen what happens when the market zeitgeist shifts from inflation to growth, the labor market softens, a big trade unwinds, and trading volumes are low.

Come week’s end the idea of an emergency rate cut by the Federal Reserve seems a little silly.

But traders are still pricing in pretty short odds of a 50 basis point cut following the September 17-18 Federal Open Market Committee meeting as opposed to the 25 basis points that seemed so generous just weeks ago.

JPMorgan expects at least 100 basis points worth of cuts by the end of 2024.

But chief global economist Bruce Kasman said the increase in the bank’s recession model is modest, noting that credit market stress is minimal right now.

And Jamie Dimon’s bank set the odds of a recession by the second half of 2025 at 45 percent.

FROM THE RESEARCH DESK

The Time To Buy

It’s hard to be a real contrarian.

“The time to buy is when there’s blood in the streets” has been attributed to multiple legends of global financial history, including Baron Rothschild and Warren Buffett.

It is tough but good advice. And Citigroup $C says recent weakness provides a solid opportunity for investors.

Citi’s “post-pullback shopping list” includes stocks with consensus “buy” ratings among the analyst community that feature good growth outlooks and stable earnings prospects.

One of its top picks is Apple $AAPL, which is down nearly 4 percent so far in August but remains a Wall Street favorite.

AAPL came under fresh selling pressure early this week after news broke last weekend that Buffett and Berkshire Hathaway $BRKA $BRKB sold a big chunk of their shares over the course of the second quarter.

Forty-five analysts cover the stock, and 33 rate it a “buy.” Eleven rate it a “hold,” and there’s a lone analyst out there who says it’s a “sell.”

The consensus 12-month price target implies 12 percent upside for AAPL from here.

Citigroup’s $C ‘post-pullback shopping list’ includes Apple $AAPL, Caterpillar $CAT, and Home Depot $HD.

Citi also favors the old-school construction manufacturing outfit Caterpillar $CAT for its high margins and generous capital return program.

That’s good ballast amid rising volatility.

CAT is down nearly 3 percent this month, though it’s bounced since reporting better-than-expected second quarter results on Tuesday.

Wall Street is circumspect on this one: nine analysts rate CAT a “buy” but 14 rate it a “hold” and three say it’s a “sell.” Consensus upside from here over the next 12 months is 3 percent.

Home Depot $HD has underperformed this year as inflation pressures have hindered DIYers and the entire housing industry.

HD, which has shed almost 6 percent so far in August, should do well and rebound as interest rates come down, is Citi’s hypothesis.

Wall Street believes in its turnaround, too, with 25 analysts rating the stock a “buy.” Twelve rate it a “hold” and two rate it a “sell.”

There’s double-digit upside for HD over the next 12 months, according to the Wall Street consensus.

That Was a Nice Thursday

”Let’s not get carried away again,” lol.

So Let’s Say There’s a Recession

“We would be OK,” according to Jamie Dimon.

The Time To Buy

It’s hard to be a real contrarian.

past issues

read more from our daily investor newsletter

Bottom Lines Are Just Fine

Incoming Data (Growth Version)

What We’re Seeing Is Good

It’s Just a Correction

Concerned About Jobs

It’s Easy Being Green

That Was a Nice Thursday

”Let’s not get carried away again,” lol.

So Let’s Say There’s a Recession

“We would be OK,” according to Jamie Dimon.

Stay ahead of the markets with our daily investing newsletter

The Time To Buy

It’s hard to be a real contrarian.

past issues

read more from our daily investor newsletter

Bottom Lines Are Just Fine