Jackson Holed

As if it was watching a summer calendar on Presidential election stock cycles, the cash S&P 500 index rallied last week.  It ended the week at 4406, up from the prior Friday’s closing price 4370. We are sitting in the “Summer stall”, a trading range.  Very normal market behavior seasonally.  At Jackson Hole, Fed Chairman Jerome Powell said that the Federal Open Market Committee won’t shy away from tightening monetary policy further if required as it seeks to bring inflation down to its 2% target.  “We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” Powell said. Outside of a pause in June, the FOMC has increased rates at each of its meetings since March 2022 in a bid to combat inflation.

University of Michigan Surveys of Consumers Friday showed US consumer sentiment declined more than projected in Augus. FWIW, historically consumer sentiment is a great contrary indicator for stocks, and this is a bullish data point, not the bearish bias that TV economists present it with.  A weekly report by the Mortgage Bankers Association showed Wednesday that mortgage rates are dragging loan demand for home purchases to the lowest point since 1995.

Technology led the weekly gainers, rising +2.6%, with the help from a +6.3% increase in chip giant Nvidia (NVDA). The company delivered amazing Q2 results and projected strong sequential revenue growth led by its data center business.  Xbox owner Microsoft (MSFT) said it will restructure its proposed acquisition of videogame maker Activision Blizzard (ATVI) in a bid to address the UK regulator’s concerns regarding the acquisition.

The second-best on the week was Consumer Discretionary, led by Lowe’s (LOW) after the home-improvement retailer maintained its full-year outlook despite reporting lower fiscal Q2 results. Bath & Body Works (BBWI) fell -4.6% as the personal care and home fragrance retailer narrowed its fiscal 2023 sales outlook as its Q2 results declined. Sporting goods retailer Dick’s Sporting Goods (DKS) slashed its full-year earnings outlook after reporting an uptick in retail theft and slow sales in its outdoor category and the stock tanked over -20%.

Consumer staples slipped -0.8%, hit by a -14% plunge in Dollar Tree (DLTR). The discount retailer tightened its full-year earnings outlook despite delivering better-than-expected quarterly results. Energy posted the steepest decline for the week, down -1.4%.

Major earnings scheduled for this week include UBS Group (UBS), Hewlett Packard (HPE), HP (HPQ), Salesforce (CRM), Dollar General (DG), and Brown-Forman (BF.A, BF.B).

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Weekly Returns ending 8/25/2023