The S&P 500 fell another 2.5% last week, putting us down 25% for the year. A better than expected jobs report showed the U.S. economy resilient in the face of rising interest rates. Asset managers responded by worrying this data would encourage the Fed to push rates higher, faster, and further than necessary, causing a recession.
Credit Suisse commented that "the worst is yet to come," and they predicted even slower GDP growth for 2023.
Nike's earnings results contributed to the negative sentiment, as the company noted that foreign currencies which have been decreasing in value relative to the dollar, created a 6% reduction to earnings. U.S. companies selling overseas are facing the same issue, and Nike is one of the first to report the true results. As companies report Q3 results in the next two months, we're going to see a lot of money vanishing from earnings. This will cause analysts to revise earnings estimates downward, causing further damage to some stock prices. The best way to play it: invest in companies that generate most of their revenue in the U.S. This prevents currency headwinds and takes advantage of the rising value of the U.S. dollar.
Discount retailers like Dollar General and Five Below meet this criteria, and benefit from their ability to procure goods overseas more cheaply while the dollar's value is strong.
This week investors will begin to have more data to evaluate, as Q3 earnings seasons kicks off and the Jewish new year comes to an end Wednesday. We're likely to see a small bear market rally, assuming no other major world events happen, before the November Fed meeting starts spooking everyone again.
Play of the Week
Daseke, Inc. Stock Buyback
"Daseke, the premier North American transportation solutions specialist dedicated to servicing challenging industrial end-markets, announced today that its Board of Directors has approved a stock repurchase program, under which the Company is authorized to repurchase up to $40 million of its outstanding common stock." (Globe Newswire)
After the announcement Friday morning, DSKE shares rocketed +14.4% and later closed the day at +10.63%.
Event Impact: +10.63%
Peak-Trough: 14.37%
Did You Miss?
Lockheed Martin Corporation
Dividend Increase
LMT announced the authorization of a fourth-quarter 2022 dividend of $3.00 per share after the close on Friday. This would represent an increase of $0.20 per share over the last quarter. The dividend is payable on Dec. 30, 2022, to holders of record as of the close of business on Dec. 1, 2022. Shares were down on a sour day of trading but rose after the announcement in after-hours trading.
LMT has benefitted significantly from the War in Ukraine, as countries around the world purchase its surface to air missile systems. LMT has had problems keeping up with the orders due to supply chain issues, but seems in position for the stock to rise should theose constraints be removed
Market Cap: 109.82 B
PE: 23.94
1 Year Price Performance: +11.66%
Mass Layoffs at Volta Inc.
EV charger provider Volta announced Thursday morning that it had cut 18% of its full-time employees through other workforce reductions since June 1, 2022. Volta also laid out a plan for organizational realignment to reduce costs and drive strategic priorities. Vince Cubbage, Interim CEO of Volta, said, "Despite near-term challenges, there is significant opportunity ahead in the EV charging market as adoption accelerates and federal funding for EV infrastructure is deployed." The announcement came with a -15.29% slash in its share price Thursday. Voltas shares, as of Friday, sit at $1.24. In one month, the stock is down -40.67%.
Companies like Volta, whose business models are yet to be proven, are getting battered following layoff announcements. Volta stock is down 84% this year, despite a massive 100% bear market rally in August.
Event Impact: -15.29%
Learning Corner
How to profit when the market is crashing (part 3)?
In prior weeks, we mentioned ETFs like UUP, TBT and SQQQ as great ways to profit in a down market. They are all up big. As we're deep into correction territory, it's time consider taking some gains and lightening up on the shorts as a bear market relief rally is likely coming.
With so many stocks down, it's time to start thinking about end of year taxes. While this doesn't sound like a great way to make money, it is easy money. If you're unfamiliar with the term tax loss harvesting, then you should read on.
If you have losses on stocks or ETFs, you can take advantage of those losses by selling the holding and replacing it with something very similar. For example, if you own Visa and have losses on it, you can sell it and buy Mastercard. By doing this, you cement the loss and can use that to offset any capital gains you have as well as $3,000 in regular income. Since you are buying a replacement for the equity you sold, you're not actually changing your investment, you're simply profiting from the tax writeoff.
This is also a useful strategy if you're wanting to raise cash but not wanting to pay taxes on long term capital gains. Use the tax deduction to offset your gains. Taking a $3,000 paper loss to wipe out a $3,000 profit is the same as making a 10% 1-year return on a $34,500 investment, after accounting for taxes - but it takes 2 minutes, not one year.
Notable Earnings Announcements This Week
Tuesday
- Acuity Brands (AYI)
- Earnings Estimate $3.61
Wednesday
- Helen of Troy (HELE)
- Earnings Estimate $2.21
Thursday
- Constellation Brands (STZ)
- Earnings Estimate $2.80
Friday
- Tilray (TLRY)
- Earnings Estimate -$0.07
Other Events
October 3
- Tokyo CPI
- US Total Vehicle Sales
October 4:
- EU PPI
- US JOLTs Job Openings
October 5
- US Balance of Trade
The LevelFields Team