Chair Powell and his fellow policymakers acknowledged that economic activity indicators have continued to strengthen and the economy has made progress towards its goals of price stability and maximum employment. But especially on employment, there is still some way to go for the recovery to be substantial enough to start tapering asset purchases. Inflation is still seen as transitory but is not broadly based and Chair Powell specified that one-off price rises, even if they are not reversed, are no sustained inflation.
Many in the markets are touting the Jackson Hole symposium at the end of next month as the big date for more taper detail. But, with only one NFP jobs report next week to be released before then, is that enough information for the Fed to shift their bias? There are then three FOMC meetings left in the year in September, November and December.
China soothes equity jitters
Equities finished mixed in the US with tech outperforming. Facebook beat earnings expectations but warned of a significant growth slowdown and the stock fell as much as 5% in extended trading. European bourses have started the morning in the green after China took steps to calm recent investor fears which helped the Hong Kong market gain over 3%.
Gold enjoying dollar woes
With the hawks disappointed after the FOMC meeting, dollar selling is helping to push gold out of its recent range. The bullish break is now within touching distance of the widely watched 200-day moving average at $1,822. A strong close above here should see the July highs at $1,829/34 come into view fairly quickly. Solid support sits at $1,789.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
Stocks finished the day mixed after the Fed revealed that the economy is on track for employment and inflation. The Dow Jones Industrial Average and S&P 500 were each down fractionally, while the tech-heavy Nasdaq added 100 points to end modestly higher.
As the economy continues on the path to recovery, the Fed tipped its hand, saying it would begin to pull back from its asset purchasing activity. The major indices still remain close to all-time high levels.
One winner in the Dow was Boeing, which surprised Wall Street by swinging to a profit for the first time almost in two years.
Stocks to Watch
The tech earnings parade rolled on, with Facebook taking the spotlight today. Mark Zuckerberg’s company sees 3.51 billion people flock to its platforms, including Facebook, Instagram, Messenger and Whatsapp, each month, up 12% YoY.
Facebook’s Q2 revenue came in at USD 29.08 billion, continuing a trend that Google, Microsoft and Apple similarly experienced in the quarter. While Facebook’s Q2 results topped Wall Street’s estimates, revenue growth is not expected to be sustained at these levels, the company warned.
PayPal bucked the positive trend in corporate America after its Q2 results disappointed. Worse, the payments company isn’t expecting things to get much better for Q3. Investors punished the stock in extended hours, sending shares lower by about 6%.
Ford shares found a reason to rally thanks to a stronger than expected Q2 in which the company was profitable. The automaker lifted its Q3 forecast on the heels of robust demand for its Ford Bronco SUV.
Shares of cannabis company Tilray climbed more than 25% in the wake of a profitable fiscal Q4. Tilray CEO Irwin Simon sees a world in which marijuana will become legalized at the federal level in the U.S. in the next 18-24 months.
On Thursday, an advance look at GDP comes out at 8:30 a.m. ET. Wells Fargo economists predict that the economy grew at an annualized pace of 9.1% in the quarter. The economy has come a long way since last year’s pandemic-fueled contraction, which lasted for two months. The economists forecast that consumer spending and business investments were strong in Q2, while supply chain constraints persisted.
Amazon’s earnings come out on Thursday. Bitcoin investors might be listening to the call to hear if the company addresses the recent crypto-related drama.
So, what’s Big Money? That’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.
Smart money managers are always looking for the next hot stock. And Facebook has many fundamental qualities that are attractive.
This sets up well for the stock going forward. But how the stock is trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares the last year.
You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.
That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the big money signals FB has made the last year.
The last few days has seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price. Red signals are showing big selling in the shares:
In 2021, the stock has steadily gained. Year to date, FB made 11 of these rare green signals. These came after a big selloff earlier this year when growth stocks were under pressure. Generally speaking, recent green bars could mean more upside is ahead.
Now, let’s check out technical action grabbing my attention:
YTD outperformance vs. technology ETF (+16% vs. XLK)
Outperformance is huge for leading stocks.
Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Facebook has been growing revenues and earnings rapidly. Take a look:
3-year sales growth rate (+28.52%)
3-year earnings growth rate (+27.3%)
Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.
In fact, Facebook has been a top-rated stock at my research firm, MAPsignals, dozens of times the last few years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.
FB has been a Big Money favorite since 2013 (live and backtested data). And since it last appeared on this report back on 8/27/2013, it’s up 832%. The blue bars below are the times that Facebook was a top pick:
I wouldn’t be surprised if Facebook makes additional appearances in the years to come. Let’s tie this all together.
Facebook continues to fire on all cylinders technically alongside growing sales and earnings. I like the long-term story of the stock.
The Bottom Line
The Facebook rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.
Disclosure: the author holds no position in FB at the time of publication.
(Corrects to show 14 not 15 companies can access GIFCT database in paragraph 9)
By Elizabeth Culliford
Until now, the Global Internet Forum to Counter Terrorism’s (GIFCT) database has focused on videos and images from terrorist groups on a United Nations list and so has largely consisted of content from Islamist extremist organizations such as Islamic State, al Qaeda and the Taliban.
Over the next few months, the group will add attacker manifestos — often shared by sympathizers after white supremacist violence — and other publications and links flagged by U.N. initiative Tech Against Terrorism. It will use lists from intelligence-sharing group Five Eyes, adding URLs and PDFs from more groups, including the Proud Boys, the Three Percenters and neo-Nazis.
The firms, which include Twitter and Alphabet Inc’s YouTube, share “hashes,” unique numerical representations of original pieces of content that have been removed from their services. Other platforms use these to identify the same content on their own sites in order to review or remove it.
While the project helps combat extremist content on mainstream platforms, groups can still post violent images and rhetoric on many other sites and parts of the internet.
The tech group wants to combat a wider range of threats, said GIFCT’s Executive Director Nicholas Rasmussen in an interview with Reuters.
“Anyone looking at the terrorism or extremism landscape has to appreciate that there are other parts…that are demanding attention right now,” Rasmussen said, citing the threats of far-right or racially motivated violent extremism.
The tech platforms have long been criticized for failing to police violent extremist content, though they also face concerns over censorship. The issue of domestic extremism, including white supremacy and militia groups, took on renewed urgency following the deadly Jan. 6 riot at the U.S. Capitol.
Fourteen companies can access the GIFCT database, including Reddit, Snapchat-owner Snap, Facebook-owned Instagram, Verizon Media, Microsoft’s LinkedIn and file-sharing service Dropbox.
GIFCT, which is now an independent organization, was created in 2017 under pressure from U.S. and European governments after a series of deadly attacks in Paris and Brussels. Its database mostly contains digital fingerprints of videos and images related to groups on the U.N. Security Council’s consolidated sanctions list and a few specific live-streamed attacks, such as the 2019 mosque shootings in Christchurch, New Zealand.
GIFCT has faced criticism and concerns from some human and digital rights groups over censorship.
“Over-achievement in this takes you in the direction of violating someone’s rights on the internet to engage in free expression,” said Rasmussen.
The group wants to continue to broaden its database to include hashes of audio files or certain symbols and grow its membership. It recently added home-rental giant Airbnb and email marketing company Mailchimp as members.
(Reporting by Elizabeth Culliford in New York; Editing by Kenneth Li and Lisa Shumaker)
Dow component Microsoft Corp. (MSFT) reports fiscal Q4 2021 earnings after Tuesday’s closing bell, with analysts forecasting a profit of $1.92 per-share on $44.3 billion in revenue. If met, earnings-per-share (EPS) will mark a 31% profit increase compared to the same quarter last year. The stock sold off nearly 3% in April despite beating Q3 expectations by wide margins and raising Q4 guidance. Buyers returned in June, lifting the tech giant into a series of all-time highs.
Overbought Signals Abound
Microsoft should post exceptionally strong results, as usual, but the stock has gained nearly 19% in the last seven weeks, setting off technically overbought signals. In addition, Mr. Softee has been named as a target by Biden administration trust-busters, even though it has avoided the broad swath of political controversy, unlike Facebook Inc. (FB) and Amazon.com Inc. (AMZN). Even so, its huge footprint has made it nearly impossible for small companies to compete, especially in the cloud computing segment.
Citigroup analyst Tyler Radke raised the firm’s target to $378 last week, noting “We expect to see a strong finish to Microsoft’s FY21 with a combination of recovering IT budgets, an uptick in expected reseller growth, signs of reacceleration in consumption models and slightly higher PC numbers vs. 3 months ago. The general numbers set-up looks attractive with conservative guidance against easy compares. We continue to like MSFT best in mega-cap software, with multiple levers for sustained DD growth at scale and significant room to run”.
Wall Street and Technical Outlook
Wall Street consensus is pristine, now yielding a ‘Buy’ rating based upon 21 ‘Buy’, 3 ‘Overweight’, and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders underweight or sell positions. Price targets currently range from a low of $256 to a Street-high $378 while the stock will open Monday’s session about $11 below the median $300 target. Upside after the report appears limited, given the proximity to the median target and strong gains since June.
Microsoft cleared 16-year resistance in 2016 and entered an historic trend advance that stalled at 190 in February 2020. It returned to that level in May after a 58-point decline, ahead of a breakout that ended at 233 in September. The stock cleared that barrier in January 2021 and eased into a rising channel that broke to the upside last week. While this marks impressive strength, it also highlights a one-sided market that’s unlikely to persist in coming weeks.
TESLA: The California-based electric vehicle and clean energy company is expected to report its second-quarter earnings of $0.94 per share, which represents year-over-year growth of over 113% from $0.44 per share seen in the same quarter a year ago.
The high-performance electric vehicle manufacturer would post revenue growth of about 90% to around $11.4 billion. The electric vehicle producer has beaten earnings three times in the last four quarters.
“A double-fly-wheel. We believe Tesla can leverage its cost leadership in EVs to aggressively expand its user base, over time generating a higher % of revenue from recurring/high-margin services revenue. Services drives the upside. We forecast Tesla’s network services EBITDA as a % of total TSLA EBITDA to reach 11% by 2025, ~18% by 2030 and ~35% by 2040. Tesla Service revenue includes automated driving, infotainment, upgrades, supercharging, maintenance, telematics, etc,” noted Adam Jonas, equity analyst at Morgan Stanley.
“Valuation supportive vs. tech. Including Network Services, Energy & Insurance to our core auto fcst, at $900 Tesla trades at ~29x EV/EBITDA in 2025 and ~6x 2025 sales. Expensive vs. auto but not vs. software/tech comps.”
LOCKHEED MARTIN: The Bethesda, Maryland-based global security and aerospace company is expected to report its second-quarter earnings of $6.53 per share, which represents year-over-year growth of about 13% from $5.79 per share seen in the same quarter a year ago.
The world’s largest defense contractor would post revenue growth of over 4% to around $16.9 billion. It is worth noting that the aerospace company has beaten earnings in all last eight quarters.
IN THE SPOTLIGHT: GOOGLE (ALPHABET), MICROSOFT, APPLE
GOOGLE (ALPHABET): The parent of Google and the world’s largest search engine that dominates internet search activity globally is expected to report its second-quarter earnings of $19.33 per share, which represents year-over-year growth of about 90% from $10.13 per share seen in the same quarter a year ago.
The Mountain View, California-based internet giant would post revenue growth of more than 45% to around $56.16 billion. It is worth noting that the company, on average, has delivered an earnings surprise of over 43% in the last four quarters.
Alphabet’s better-than-expected results, which will be announced on Tuesday, July 27, would help the stock hit new all-time highs. Alphabet shares surged more than 50% so far this year. On Friday, the stock closed at a fresh record high at $2,660.30, up 3.57%.
MICROSOFT: The Redmond, Washington-based global technology giant would report its fiscal fourth-quarter earnings of $1.91 per share, which represents year-over-year growth of over 30% from $1.46 per share seen in the same quarter a year ago. The world’s largest software maker would post revenue growth of over 15% to around $44.1 billion, up from the $38.03 billion a year earlier.
“Channel work and our CIO survey point to building momentum across the Cloud, Hybrid and On-premise portfolio, which should power a solid Q4. While investors seek reassurances margin expansion continues into FY22, our model suggests durable high-teens EPS growth and upside in the shares,” noted Keith Weiss, equity analyst at Morgan Stanley.
Microsoft’s better-than-expected results, which will be announced on Tuesday, July 27, would help the stock hit new all-time highs. Microsoft shares have surged more than 30% so far this year.
APPLE: The consumer electronics giant would post its fiscal third-quarter earnings of $1.01 per share, which represents year-over-year growth of over 55% from $0.65 per share seen in the same quarter a year ago.
The iPhone manufacturer would post revenue growth of over 20% to around $73.3 billion up from $59.69 billion a year earlier. It is worth noting that the company has beaten earnings in all last eight quarters.
The world’s largest online social network is expected to report its second-quarter earnings of $3.04 per share, which represents year-over-year growth of about 70% from $1.80 per share seen in the same quarter a year ago. The Menlo Park, California-based social media conglomerate would post revenue growth of over 49% to around $28.0 billion.
“Monetization Potential: We are positive on FB’s monetization roll-out of Instagram as well as FB’s ability to continue to innovate and improve its monetization (Canvas Ads, Dynamic Ads, video). Combined with the high and growing engagement we see monetization upside going forward,” noted Brian Nowak, equity analyst at Morgan Stanley.
“Investing from Position of Strength to Drive Faster Long-Term Growth: We are modeling ~33% GAAP opex (excl. one-time items) growth in 2021, implying an incremental ~$18bn in opex. Our base case model implies opex per employee moderates in ’21 while FB hiring remains roughly flat on an absolute basis. We believe FB will grow EPS at a ~39% CAGR (2019-2022).”
The eCommerce leader for physical and digital merchandise is expected to report its second-quarter earnings of $12.24 per share, which represents year-over-year growth of about 19% from $10.3 per share seen in the same quarter a year ago.
The Seattle, Washington-based multinational technology giant would post revenue growth of about 29% to around $115 billion. The company has beaten earnings per share (EPS) estimates at all times in the last four quarters.
The Australian Competition and Consumer Commission (ACCC), which previously slapped the world’s toughest content licencing rules on Facebook Inc and Alphabet Inc’s Google, said it was now looking at retail as part of a wider examination of so-called Big Tech.
“Online marketplaces are an important and growing segment of the economy so it is important that we understand how online marketplaces operate and whether they are working effectively for consumers and businesses,” ACCC Chair Rod Sims said in a statement.
“We want to be sure that the rules that apply to traditional retail are also complied with in the online context.”
The ACCC would take submissions until mid-August with a final report due in March 2022, the regulator said.
An Amazon spokesperson said the company looked “forward to engaging with the ACCC on these important topics in the coming months”, while an eBay representative was not immediately available for comment.
The Australian regulator said it would examine the relationships between large online markets and third-party sellers and shoppers, including competition impacts and handling of data, complaints and reviews.
Amazon has not reached the market dominance in Australia since launching in 2017 that it experiences elsewhere, but still doubled sales in calendar 2020, the ACCC said.
Overall, Australian online purchases jumped 57% in 2020 for a record $50.5 billion spend amid a series of coronavirus lockdowns, it added.
The ACCC said it had received wide-ranging complaints, including the “quality of goods sold on marketplaces, the timeliness of payment remittance to sellers, how goods are put on display on marketplaces, and the level of support provided by marketplaces to consumers when disputes arise”.
The ACCC has been conducting a series of investigations in recent months as part of a broader Digital Platform Services Inquiry.
($1 = 1.3609 Australian dollars)
(Reporting by Byron Kaye; editing by Jane Wardell and Michael Perry)
Facebook Inc. (FB) is trading at a four-week low in Monday’s pre-market after pushing back on White House accusations that COVID-19 misinformation on the platform is “killing people”. The allegation set off a political firestorm in the United States last week, with conservatives accusing President Biden of seeking control of the online service in order to silence critics. Meanwhile, liberals are backing the President, frustrated by a long-standing contentious relationship with CEO Marc Zuckerberg.
Pouring Gasoline on the Political Fire
White House press secretary Jen Psaki ignited the political controversy on Thursday, alleging that Facebook is “not doing enough to stop the spread of misinformation about the virus and the COVID-19 vaccine”. Biden poured gasoline on the incendiary criticism ahead of the weekend, insisting “They’re killing people. I mean, it really – look, the only pandemic we have is among the unvaccinated and they’re killing people.”
Facebook fired back this morning, insisting it “was not the reason the 70% vaccination goal was missed”. The release noted that “data shows that 85% of Facebook users in the US have been or want to be vaccinated against COVID-19. President Biden’s goal was for 70% of Americans to be vaccinated by July 4. Facebook is not the reason this goal was missed. Since the pandemic began, more than 2 billion people have viewed authoritative information about COVID-19 and vaccines on Facebook”.
Wall Street and Technical Outlook
Wall Street consensus hasn’t reacted to recent political events, maintaining a ‘Buy’ rating based upon 40 ‘Buy’, 3 ‘Overweight’, 8 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $275 to a Street-high $460 while the stock is set to open Monday’s session more than $55 below the median $395 target. This humble placement suggests the pullback will offer a low risk buying opportunity in coming weeks.
Facebook broke out above the August 2020 high at 304.67 in April, entering a strong trend advance that stalled above 355 in June. Two breakout attempts since that time have failed, giving way to a decline that’s now testing short-term support near 337. The selloff could stretch into the 50-day moving average at 334 while the risk of even lower prices will remain high through next week’s Q2 earnings report, which has the power to trigger a larger-scale decline.
As investment money will always be looking for a place to roost many stocks still look like the best opportunity for alpha, especially some of your bigger high-tech companies like Microsoft, Google, Facebook, etc… who don’t face the same headwinds created by supply chain dislocations, higher commodity prices, etc.
Bulls are hoping to see more money lured into the market by strong Q2 earnings which have so far failed to ignite a meaningful rally. Analyst expectations for S&P 500 company earnings is still around +65%, something stock bears argue is lofty considering the extreme level of supply chain dislocations and labor shortages.
There is also a lot of debate about whether corporate profit gains are “peaking” in the face of slower growth in the quarters ahead as the reopening boom begins to fade. Remember, investors place bets on the future, not what happened last quarter.
The earnings pace really picks up next week with highlights including IBM on Monday; Chipotle and Netflix on Tuesday; ASML, CocaCola, Novartis, and Verizon on Wednesday; Abbott Labs, AT&T, Biogen, Capital One, Dow Inc., Intel, Snap, Southwest Airlines, Twitter, and Union Pacific on Thursday; and American Express, Honeywell, and Nextera on Friday.
One of the biggest factors that seem to be weighing on investor sentiment continues to be inflation. The latest indication of rising costs was reflected last week in U.S. Import Prices, which climbed for an eighth straight month in June.
However, the year-on-year increase slid to +11.2%, down from +11.6% in May is an encouraging sign that some inflationary pressures might be starting to ease. Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee yesterday, repeated the script he’s stuck with for months, saying inflation will likely remain elevated in the coming weeks and months before moderating.
Powell also told lawmakers that the Fed is not in a hurry to start paring its monthly asset purchases but he stressed that the central bank is prepared to adjust policy if they see signs of inflation moving “materially and persistently beyond levels consistent with our goal.” Wall Street increasingly expects the Fed to start trimming asset purchases later this year and even start lifting rates as soon as Q4 2022.
The Fed meets next on July 27-28 but most analysts think Powell will wait to make any big policy change announcements at either the annual Jackson Hole symposium at the end of August or possibly the FOMC’s September policy meeting. Central banks in Canada and New Zealand this week scaled back their asset purchase schemes which some worry could start to put pressure on central bankers in other developed countries to also tighten.
The European Central Bank releases its latest policy decision next Thursday. Bulls still largely believe that U.S. growth will be able to outpace “transitory” inflation pressures but the outlook for some companies could dim if the Fed starts reining in its “easy money” policies sooner than investors have been anticipating.
SP500 technical analysis
SP500 pulled back last week after another attempt to break out. There is no surprise we see such choppiness in the middle of summer. Moreover, very likely this price activity will stay for a few more weeks. We are still in a bull market. However, the risk of deep pullback is rising. If that happens, SP500 will target to close the gap near 4000.
On the other hand, if the price sustains above Gann resistance 4400, bulls will target 4500 at least. Two of my favourite indicators are giving opposite signals now. So, I don’t have any strong bias at the moment. Advance Decline Line remains bearish. At the same time, Insider Accumulation is bullish. In general, swing traders have to focus on daily support and resistance. Likely it will take few more weeks to see a real direction. Short-term traders can use Gann levels and Cycles on 4h charts to find trading opportunities.
Twitter Inc. (TWTR) reports Q2 2021 earnings after Thursday’s closing bell, with analysts looking for a profit of just $0.07 per-share on $1.06 billion in revenue. If met, earnings-per-share (EPS) will mark a turnaround from the $0.16 loss posted in the same quarter last year, which included the exit from the first pandemic lockdown The stock fell nearly 10% in April after reporting weaker-than-expected Q1 user growth and providing weak Q2 revenue guidance.
Betting on Twitter Blue
The social media outlet hopes the Twitter Blue subscription service will improve its tepid bottom line in coming quarters. It rolled out the premium program in Australia and Canada in June but there’s no U.S. release date. According to the press release “we’ve heard from the people that use Twitter a lot, and we mean a lot, that we don’t always build power features that meet their needs. Well, that’s about to change. We took this feedback to heart, and are developing and iterating upon a solution that will give the people who use Twitter the most what they are looking for.”
U.S. media outlets that booked massive subscription gains during the Trump years are reporting sharp readership declines as we enter the second half of 2021, reflecting disengagement generated by the pandemic and the less-bombastic governing style of President Joe Biden. Twitter and rival Facebook Inc. (FB) are vulnerable to the same forces of political exhaustion and mean reversion, raising odds that daily average user (DAU) growth will miss Q2 expectations.
Wall Street and Technical Outlook
Wall Street consensus has deteriorated since April despite the new offering, with a ‘Hold’ rating based upon 9 ‘Buy’, 1 ‘Overweight’, 26 ‘Hold’, and 1 ‘Underweight’ recommendation. In addition, three analysts recommend that shareholders close positions move to the sidelines. Price targets currently range from a low of $30 to a Street-high $83 while the stock closed Friday’s session just $1 above the median $65 target. This placement suggests that Twitter is fully-valued at this time.
Twitter sold off from 74 in 2013 to 14 in 2016, turning higher into the 2018 high at 48. It posted a higher low during the pandemic decline, ahead of renewed upside that reached multi-year resistance in October 2020. A February 2021 breakout failed, yielding more than four months of mixed action between resistance in the mid-70s and support in the upper 40s. The tape has shown little accumulation since May despite a persistent uptick, predicting rangebound action well into the fourth quarter.
The S&P 500 technology sector index ended a four-day winning streak. Earlier this week, investors’ favor for heavyweight growth stocks pushed the S&P 500 and the Nasdaq to record highs.
The S&P 500 energy sector index fell more than 1% and tracked a drop in crude prices on expectations of more supply after a compromise agreement between leading OPEC producers.
Fresh data showed the number of Americans filing new claims for unemployment benefits fell last week to a 16-month low, while worker shortages and bottlenecks in the supply chain have frustrated efforts by businesses to ramp up production to meet strong demand for goods and services.
Federal Reserve Chair Jerome Powell told lawmakers he anticipated the shortages and high inflation would abate. Yet many investors still worry that more sustained inflation could lead to a sooner-than-expected tightening of monetary policy.
“People are very nervous and concerned about inflation, tax rates and the (2022 midterm) election. Those three things are very much on people’s minds,” said 6 Meridian Chief Investment Officer Andrew Mies, describing recent phone calls with his firm’s clients.
Unofficially, the Dow Jones Industrial Average rose 54.52 points, or 0.16%, to 34,987.75, the S&P 500 lost 14.29 points, or 0.33%, to 4,360.01 and the Nasdaq Composite dropped 101.82 points, or 0.7%, to 14,543.13.
Morgan Stanley dipped as much as 1.2% after it beat expectations for quarterly profit, getting a boost from record investment banking activity even as the trading bonanza that supported results in recent quarters slowed down.
Second-quarter reporting season kicked off this week, with the four largest U.S. lenders – Wells Fargo & Co, Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co – posting a combined $33 billion in profits, but also highlighting the industry’s sensitivity to low interest rates.
Blackstone said late on Wednesday it would pay $2.2 billion for 9.9% stake in American International Group’s life and retirement business. AIG and Blackstone both rallied.
Johnson & Johnson dipped after it voluntarily recalled five aerosol sunscreen products in the United States after detecting a cancer-causing chemical in some samples.
Stocks came out of the gate strong, with the S&P 500 and Nasdaq both setting new record highs, buoyed by Facebook. The social media giant gained more than 4% on the day and is up in extended hours thanks to a court ruling that went Mark Zuckerberg’s way in an antitrust case filed by the FTC.
Today marked the third consecutive all-time high for the S&P 500. The Dow Jones Industrial Average didn’t join the party and closed the day slightly in the red. Dow member Boeing pressured the index due to a regulatory setback for its 777X aircraft.
Outside of the stock market, cryptocurrencies were in focus after ARK Invest filed with the U.S. SEC for a bitcoin ETF. The bitcoin price has been leading the markets higher all day even before the ETF development. Cathie Wood, who is at the helm of ARK Invest, is also a Tesla bull.
Stocks to Watch
The top three most actively traded companies today were meme stocks.
Context Logic topped the list. The stock, which trades under the symbol WISH, gained 2.5% on the day with 175 million shares changing hands vs. the average volume of 46 million.
Virgin Galactic, which was last week’s winner, gave back some ground today, falling nearly 2% after its value ballooned by nearly 40% on Friday. The company received regulatory approval for commercial flights to space.
AMC Entertainment tacked on 7.5% after enjoying its best weekend for ticket sales since before the pandemic as moviegoers returned to the theaters.
Financials in Focus
Morgan Stanley is up 3.4% in after-hours trading after revealing that it would increase its quarterly dividend twofold to USD 0.70 per share as soon as Q3, pending board approval. The investment bank is going for it and also announced a USD 12 billion share buyback program on the heels of the recent stress test.
JPMorgan lifted its dividend to USD 1 per share, an 11% increase in the payout.
Bank of America is increasing its distribution by 17% to USD 0.21 per share.
Goldman Sachs announced a 60% increase to its quarterly dividend to USD 2 per share, up from USD 1.25.
The markets are also bracing for June’s employment report, which is expected on Friday. In the interim, Richmond Fed President Thomas Barkin will be making comments on Tuesday. The earnings calendar is light.
Amazon and Google are under investigation by British regulators over concerns that they are not doing enough to tackle the issue of fake reviews on their platforms. Google has been facing criticisms from European regulators, with the UK’s probe the third time this month for the search engine giant.
UK’s CMA Investigates Amazon and Google
UK’s Competition and Markets Authority (CMA) has revealed earlier today that it is probing online retail giant Amazon and search engine company Google for not doing enough to tackle fake reviews on their respective platforms.
Andrea Coscelli, chief executive of the CMA, said they are investigating concerns that Google and Amazon have not been taking the required steps to prevent and remove fake reviews to protect honest businesses and customers. “It’s important that these tech platforms take responsibility, and we stand ready to take action if we find that they are not doing enough,” he added.
The regulator is concerned that fake consumer reviews have become a huge problem in the e-commerce sector. Amazon has become the number one platform merchants use to hype up their products online. However, the e-commerce giant is doing something about it as it called out social media platforms to help it weed out fake reviews.
The CMA said it would look into Amazon and Google to determine their efforts in detecting and removing fake reviews. The investigation will also look at whether the tech giants penalize reviewers or firms to stop them from posting misleading scores. The CMA praised Facebook for removing thousands of groups that were dealing in false and misleading reviews. The social media company also made changes to its systems to identify, remove and prevent misleading content from appearing on its various platforms.
At the time of this report, Amazon’s stock price is down by 1.56% ahead of the trading session on Friday.
Google is Coming Under Pressure in Europe
Google is facing pressure in Europe. Earlier this month, Google was fined $267 million by the French Competition Authority after the search engine giant was accused of abusing its leadership in the online advert sector. The European Commission (EC) officially launched an investigation into Google’s advertising unit for also abusing its dominance in the market.
Google’s stock price is up by less than 1% at Friday’s pre-market trading decision despite the looming investigation in the UK.
Here’s how I found the top stocks to own in July of 2021. I went to MAPsginals.com and I found all the Top 20 stocks since 2012. I then just sorted for the most frequently occurring stocks in descending order. This is what I found:
Outlier stocks are the ones that account for a lion’s share of the gains of the stock market. One thing they have in common is the same ones keep showing up over and over. These were the top 5.
To show why they are great quality stocks, I wanted some quick metrics. I looked up the following key fundamentals I look for:
1 Year Sales Growth
3 Year Sales Growth
1 Year Earnings Growth
3 Year Earnings Growth
The best quality stocks being bought by big money is what I look for and these fit the bill. Look at these stunning fundamentals:
The real test is if Big Money is buying the stocks. By finding the ones most frequently on the Top 20 report, we get a quick filter for the best of the best. In order to even get on one instance of a MAP Top 20 report, the stock needs to have superior fundamentals and get some Big Money Buy Signals. The Top 20 stocks are the best 20 out of over 6,000 every week. So imagine what it means to be on a report 70 or 80 times!
Here’s what it looks like… below we are the instances when each stock saw Big Money buying and made our rare Top 20 report. The key to finding outlier stocks is the repeating Buy signals.
Source: MAPsignals, end of day data sourced from Tiingo.com
So there you have it: a power packed list of the best stocks for July 2021. I’d like to say this is a quick and dirty way to find the best stocks out there, but there’s nothing dirty about it. MAPsignals uses quantitative analysis of mounds of daily stock data. Thirty years of it says two clear things:
Outliers keep appearing time and time again.
When they do, those are the best in show.
When Big Money is buying the best quality stocks, we should always pay attention. But when they do it year after year, it’s a message we don’t want to miss.
The Bottom Line
FB, ALGN, FTNT, ADBE, & NVDA represent the best stocks for July 2021. Based on strong fundamentals and Big Money buy signals year after year, these are worth further investigation.
France’s competition regulator has fined search engine giant Google $267 million after accusing it of abusing its market power in the online advertising sector. This latest development follows a tradition of US tech companies getting into trouble with European regulators.
France fines Google $267 million
The French Competition Authority announced earlier today that it had fined Google 220 million euros ($267 million). The search engine giant was accused of abusing its position in the market by unfairly sending business to its own service and discriminated against competitors in the online advertising industry.
According to the report, Google has agreed to pay the fine and is set to end some of its selfish practices. The investigation conducted by the regulatory agency revealed that Google favored its DFP advertising server and SSP AdX listing platform. By so doing, publishers of sites and applications favored doing business with Google. They also sold their impressions to the search engine giant. Hence, causing suffering to Google’s rivals and publishers.
Isabelle de Silva, head of the French Competition Authority, said this decision is the first of its kind in the world. France is the first country to critically look at the complex algorithmic auction processes that the online advertising space works with. She added that Google’s act has made it tough for competitors in the online advertising sector and increased the company’s dominant position.
Thanks to the fine and Google changing its policies, France is sure to create a level playing field for all advertisers and to enable publishers to make the most of their advertising spaces. The sanction came after French newspaper Le Figaro, the Belgian press group Rossel and US-based News Corp filed a complaint against the Alphabet Inc. company.
The stock price of Alphabet Inc., Google’s parent company, is down by two points during Monday’s pre-market session. The Alphabet shares are currently trading at $2,449.70.
US Tech Giants can’t seem to catch a break in Europe
European regulators are clamping down on major US tech companies due to the massive control they have within the EU. The need to regulate the activities of tech companies led to the roll-out of the GDPR in the region.
G7 Countries Agree To A Minimum Global Corporate Tax Rate
S&P 500 futures are swinging between gains and losses in premarket trading while traders evaluate their next steps after the historic G7 tax deal.
Over the week, G7 countries agreed to a minimum global corporate tax rate of at least 15%. The details of the deal would have to be negotiated over the upcoming months, and G7 countries will have to convince the rest of the world to join the deal.
The deal is viewed as a way to tax international tech giants, although it will have a significant impact on most industries. Interestingly, stocks like Apple or Facebook are mostly flat in premarket trading, and it looks that traders will wait for the upcoming negotiations before coming up with final conclusions about the ultimate impact of the new tax deal.
U.S. Dollar Remains Flat Despite Yellen’s Comments
The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, remains close to the psychologically important 90 level despite comments from Treasury Secretary Janet Yellen that higher rate would be “a good thing”.
Yellen has recently stated that a slightly higher interest rate environment would be beneficial for the society. Yellen has been very dovish in the previous months, and this sudden change of tone could have had an impact on currency dynamics.
However, it looks that traders believe that Fed Chair Jerome Powell will keep rates at the bottom for as long as he can which is bearish for the American currency and bullish for stocks.
WTI Oil Tries To Settle Above The $70 Level
WTI oil has recently managed to settle above the $69 level and continues to move higher as traders focus on rising oil demand and the successful implementation of OPEC+ deal.
WTI oil has already made an attempt to settle above the $70 level but lost momentum and pulled back closer to $69.50. The oil market remains bullish, and it looks that oil may soon get to another test of the $70 level. In this light, energy-related stocks have a good chance to start the week on a strong note.
Social media companies mostly make their money from adverts. However, Twitter wants to change the game by launching a subscription service, and it is targeting over 300 million users over the coming years.
Twitter launches Twitter Blue
Leading social media company Twitter has launched Twitter Blue, its first subscription service. The company announced earlier today that the service is designed for power users willing to pay a monthly fee to gain access to exclusive features.
According to the company, the service is currently available to users in Canada and Australia. Twitter charges $3.49 (Canada) and $4.49 (Australia) in local currencies per month. However, it didn’t reveal when the service would be available to US users.
Per the announcement, the Twitter Blue service will come with an Undo Tweet feature, allowing users to set a customizable timer of up to 30 seconds to reverse a tweet if the user needs to fix it before tweeting again. Although users requested an edit feature, the Undo Tweet feature works differently. The feature allows subscribers to preview the nature of their tweets and adjust them before publishing.
Twitter added that the service contains other features such as a reader mode, bookmark folders, customize the Twitter app icons on mobile phones, dedicated customer support, and access to color themes for the app.
The company’s stock price went up by 1.3% during the pre-market trading session. The rally has continued, as investors positively welcomed this latest development.
Will users pay to use social media?
At the start of the year, Twitter set the goal of reaching 315 million monetizable daily active users before the end of 2023. It also wants to double its annual revenue to $7.5 billion by that time as Twitter makes generates of its money via advertising.
Traditionally, social media companies like Twitter and Facebook make most of their money from advertising. In fact, advertising currently makes up 86% of Twitter’s revenue. However, the social media company is looking to diversify its revenue source.
A large percentage of the people who use social media platforms use them for free. Hence, the idea of paying to enjoy special features such as the Undo Tweet might take a while for users to catch on to. The market is still new, and it might take a while before people decide if they will pay for social media services or not.
A portfolio of outlier stocks can become chock full of monster gains for years to come, if chosen wisely.
But wouldn’t it be great if there was already a collection of outliers we could buy without even having to think about it?
Well maybe there is a way to do just that… through outlier ETFs.
So, here I’m going to give you the best ETFs that big money is getting involved in this month.
First thing’s first: to find them, I looked at all the ETFs making Big Money signals. I did that by heading over to MAPsignals.com and then looked at the Big Money ETF Buys and Sells chart. I looked at days with the biggest buying, circled here:
Once I had all the ETFs, I wanted to know which were the best potential opportunities. ETFs are baskets of stocks. And because MAPsignals scores over 6,000 stocks every day, as long as I know which stocks make up the ETFs, I can rank them all.
Here are the 5 best ETFs with scores: The Composite score, Technical score, and Fundamental score. These were computed by accounting for each components stock’s score and its associated weighting in the ETF. (keep in mind that weightings will change from time to time)
Below we see each ETF, their recent Big Money activity, and their scores. XLF, ITB, and XLC are top ranked ETFs. That makes sense because financials, home builders, and communications stocks have been leading the market much of this year so far.
IGV and ARKG, however, rank low on our list of ETFs. But there is opportunity here because the low scores are due to weak technicals. Big Money has been selling these ETFs, largely because they are heavily concentrated in growth stocks. But these stocks have excellent fundamentals: growing sales and earnings and big profits. These weak ETFs represent great potential bargains.
Let’s quickly look at the year-to-date performance of these 5 ETFs:
Now let’s quickly look at Big Money buying in the ETFs. Each chart below has many green bars which represents unusually large buying. The few red bars represent unusually large selling. What jumps out is the huge buying in all the ETFs.
Only with IGV and ARKG, there was recent selling too. But again, selling on ETFs and stocks with great fundamentals represents a value opportunity.
Here’s why I like these ETFs: they are highly concentrated with fundamentally superior stocks. Below we see a table of three stocks in each ETF. They are some of the highest weightings in each.
Notice their fundamental scores are very strong on a scale from 0-100. This means strong growing sales, earnings, and profits over one and three years. This is how MAPsignals boils down all its fundamental research into one elegant score.
Now with XLF, ITB, and XLC – we see the stocks also have strong technical scores. That means Big Money has been pouring into them, lifting them to new highs. They are buoyant with Big Money support. But in IGV and AKG, we see weak technical scores. This means Big Money has been exiting the stocks.
But before you get spooked, let’s keep the recent environment in mind: Growth has fallen out of favor while value and reopen stocks have become all the rage. But it’s essential to remember these growth companies create phenomenal products and services enhancing our lives. I don’t foresee that stopping in the future. The recent selling is temporary and thematic.
What really drives this home is looking at how long-term Big Money buying can lead to monstrous gains. Below are charts showing all the instances these stocks were Top stocks in our research since 2015: our weekly report of outliers. We don’t need to go into details on each chart.
I’d like you to notice a few things:
When Big Money buying pours in, stocks go up
Repeated outliers, especially for years often means outsized gains
Owning outlier stocks is the way I try to beat markets. Easy exposure to many stocks can be achieved by buying ETFs. But just like anything, you must be in the 1% if you want to be in the 1%.
We can find outlier ETFs by tracking the Big Money. But that alone isn’t enough: when we catalog the components and find outlier stocks underneath… that’s the winning recipe.
So, there you have it: the 5 best ETFs that Big Money has been trafficking in recently. Outlier ETFs hold outlier stocks. Finding them is the key to finding potentially outlier gains.
Now let’s look at what those look like:
The Bottom Line
XLF, ITB, XLC, IGV, & ARKG represent top ETFs for June 2021. Financials, homebuilders, & Communications stocks have performed well lately, which should continue. Software and Genomics companies have reached interesting levels, too. Paying attention to the fundamental quality of ETF constituents is paramount.
Disclosure: the author holds long positions GOOGL, CRM, & REGN in managed accounts, but no positions in XLF, ITB, XLC, IGV, ARKG, BLK, SCHW, SPGI, DHI, LEN, LOW, FB, ATVI, ADBE, MSFT, TDOC, & VRTX at the time of publication.
This, despite positive growth expectations, with GDP expected to increase by over 6% this year, and a glowing earnings season in which almost 90% of S&P 500 companies have bested earnings expectations. The fear, however, is that the market has more than priced-in future growth expectations and that areas of it are becoming overstretched. This was most clear in the growth stocks that have already run so hot in recent months.
The S&P 500 closed down around 1%. The Dow Jones, which surged to record highs above 35,000 earlier in the session, also closed down by a fraction of a percent. This left the brunt of the sell-off to the Nasdaq stocks. The Nasdaq had its worst day since March, down around 2.5% over the day. Monday’s price action saw it dipping right to the 50-day moving average, which it failed to hold in late February, only to test it as resistance throughout most of March.
The FANG component led the sell-off; Alphabet was down 2.5%, Facebook down by over 4% following a Citigroup downgrade of the pair from “buy” to “neutral.” Earlier in the month, the Fed’s financial stability report chimed in on the above concerns, warning that a broad set of assets are vulnerable to “large and sudden declines.” While the market doesn’t seem overly concerned with imminent rate increases, it does appear to be questioning whether this equity rally is a little long in the tooth. This is evident in story stocks like Tesla and other frothier areas of the market like SPACs also taking a significant hit.
If we look a little further back, we can see that the Nasdaq led the recent sell-off. It peaked in mid-April, failed to break higher by the end of the month, and has been on a downtrend since then. During the same period, the S&P 500 had been gently grinding higher, trading mostly sideways until the rally on May 7 and sell-off on May 10.
The question remains whether this is still a sector rotation, or if these are just the first dominoes to fall. It’s an impossibly hard question to answer because you’d expect these same sectors to sell off in both a rotation and the beginning of a broader downtrend. As far as the Nasdaq is concerned, even if it fails to hold its 50-day moving average, it still has the 20-week as a historical line of support.
For more sector-specific canaries in the coal mine, we have to look to the areas of the market that have continued to outperform, despite the selling of growth and lockdown stocks. These are the pockets of US equities with uptrends that remain intact. For instance, the recent move down barely registered in the value stocks. Despite closing down around 1%, this component has yet to even set a lower low.
The same can be said of home construction, transportation, real estate, basic materials, metals & mining, energy, and even financials. All these sectors exhibit similar chart patterns, albeit some recently making new highs, while others merely rose to test their former highs. To answer the question we started with, we need to verify whether it’s just growth that’s cooling off at the moment, and to watch closely for patterns changing in any of the above sectors. It should be an interesting month.
HYCM is the global brand name of Henyep Capital Markets (UK) Limited, HYCM (Europe) Ltd, Henyep Capital Markets (DIFC) Ltd and HYCM Limited, all individual entities under Henyep Capital Markets Group, a global corporation founded in 1977, operating in Asia, Europe, and the Middle East.
High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.
Senators Ed Markey and Richard Blumenthal and Representatives Kathy Castor and Lori Trahan said Facebook had not addressed their concerns. Facebook told the lawmakers in an April 26 letter made public Tuesday that it does not have a set timeline for the version, but expects development will “take many months.”
(Reporting by David Shepardson; Editing by Chizu Nomiyama)