Weekly Roundup: January 9-13, 2023 (Week 2/52)
Weekly Roundup: Week 2
Market Review:
The positive sentiment surrounding the stock market, is something we have not seen in a while. It is giving investors an uneasy feeling, with all of the talks of an upcoming recession happening. Things changed this week though, Banks earnings came out on Friday. The overall message coming from a majority of the banks are that if a recession does loom, it will be a lot more mild than anticipated. This week brought us some key economic reports. Thursday was the day to watch out for, with all of the inflation data coming out. Inflation has been a hot topic over the past few years. The Federal Reserve has been hiking interest rates to try and curb inflation. We got a good idea of how effective the Fed has been in doing their job. All the inflation data came in as expected, but most importantly, came in lower than previous levels. Core CPI on a year-over-year basis came in at 5.7%, which was lower than the 6.0% in the previous period. CPI on a year-over-year basis came in at 6.5%, which was lower than the 7.1% in the previous period. These are some really positive signs for not only the Fed, but for all of the investors fearing a rough recession. The jobless claims came in a little lower than expected, which is quite surprising for the current state we are in. We are seeing a lot of the bigger corporations cut their workforce, but this isn't reflected in the data being reported. Maybe when January information comes out, we will see these numbers go up, due to a lot of the cuts in workforce coming within the past couple of weeks. The key economic data that came out in the past week has led to another week of gains in the stock market. If I told you that the first two weeks for the stock market would end in a positive territory, you would probably think I was crazy. However, it is true, and investors are becoming less fearful of a huge decline in stocks. I think one of two things are happening. Either the recession was already priced in with the losses suffered last year, or the stock market will start to decline even more when the top corporations report earnings and shows slowdown. It is hard to grasp what exactly the case is, but for now I'm enjoying the rally and positive sentiment.
Looking deeper into individual companies. A lot of talk has been with Tesla. With so much speculation in the past year leading to a 65% decline in stock price, Tesla has a lot of negative sentiment with shareholders right now. Tesla announced that they will be lowering the prices in their models to try an get rid of inventory. In recent reports, Tesla had a lot of inventory leftover and is now looking for ways to get rid of the inventory. These reports sent a shockwave through the whole EV industry because of lower prices causing more competition. Meme stocks have made a comeback here in the past week. Companies that are on the verge of bankruptcy, and companies that I think will be bankrupt in the near term, are having really high levels of short interest. This has caused a short squeeze to loom, with stocks like Bed Bath and Beyond and Carvana seeing some significant gains.
Company Earnings:
Thursday:
- Taiwan Semiconductor ($TSM)- TSM saw positive sentiment from investors, after reporting earnings before the market opened on Thursday. The stock popped and saw some gains in share price. I don't understand the positive sentiment, because the results were mixed on the earnings print. The company missed on sales, but beat on earnings. Guidance was lower, due to demand weakening with the economy lingering on a recession. TSM is planning on making a spending cut and plans to outsmart the downturn in chip demand. With optimism to consumers and investors, TSM will be one to keep a close eye on in the next couple of quarters.
- UnitedHealth ($UNH)- UnitedHealth had a very volatile Friday, after reporting earning in the morning. The stock popped off in the early part of the trading session, but later fell and ended up trading lower by the end of the session. The revenues were a slight miss, but earnings were a beat. The company also reaffirmed their FY guidance. The company is starting to see the business return to pre-pandemic levels. With double-digit growth, the company looks pretty promising for the next fiscal year. UnitedHealth will be a Healthcare stock to watch, and could be a perfect stock to add, to diversify your portfolio a little bit.
- JPMorgan Chase ($JPM)- JP Morgan, known as Chase, saw some gains after reporting earnings before the market opened on Friday morning. The company topped estimates on their financial reports, but they could be facing some headwinds in the near future. The common theme among all the banks earnings was that a recession would be a lot more mild than many were anticipating. JPMorgan is facing a lot of heat with their acquisition of Frank. This was a complete failure and is leaving investors questioning the leadership and process of acquisitions within the company. JPMorgan is looking to file suit and go through legal issues, so it will be interesting to see how all of this plays out.
- Delta Air Lines ($DAL)- Delta Air Lines saw declines, after reporting earnings before the market opened on Friday morning. The company was able to beat on revenues and profits. The main concern for the company that lead to a little bit of bad sentiment from investors, was the high labor costs. This has caused Delta to lower the profit forecast. The travel levels are still not back up to pre-pandemic levels, but the demand is growing stronger. One of the benefits that Delta sees, was the failure Southwest had a couple of weeks ago. The Southwest fallout has customers looking for new airlines to use. This should help Delta gain some new customers and lead to some more revenues. Air Lines have a long way to go, and I may stay out of them until I can see some better financial optimization from management.
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