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Monday 14 February 2022
On Sunday’s Super Bowl, there was Dwayne “The Rock” Johnson taking the Super Bowl off the right foot as only he could.
Couple things stood out to me as the Great was speaking:
1) He never babbles over his words on the mic, going back to his WWE days.
2) Under Armor needs a bigger deal with The Rock (they signed him up for a clothing line in 2016).
3) His arms are huge, just like the rating in the S&P 500 (yes, that’s what I always think of).
While the S&P 500’s valuation is just as big and bulky as The Rock’s biceps, only one is worth deflecting. Rest assured that The Rock’s precise arm samples aren’t what need unpacking.
No, it’s stock market valuation that ensures that the air is let out. To this end, enter the big and powerful Wall Street.
On Monday, David Kostin, chief US equity strategist at Goldman, lowered his target for the S&P 500 index for the end of 2022 to 4900 from 5100. This was expected after his colleague Jan Hatzius, chief economist at Goldman, said, He raised his forecast for raising interest rates this year to seven from five last week.
“Uncertainty prevails regarding the trajectory of inflation and Fed policy. We believe double-sided risks are present in our fundamental outlook for the S&P 500, but with a larger downside,” Kostin says.
Some of you will say, “Brian, Costin’s new target is still 11% higher than current levels.” So I say it doesn’t matter in this cautious environment. It’s more about the drawdown itself and the signal it’s sending to investors – Goldman Sachs is less bullish on stocks, and maybe it’s time to get a little defensive.
I expect more calls for a rating downgrade like Kostin before the Fed meeting next month, which could exacerbate the geopolitical pressures now facing markets thanks to the situation in Russia/Ukraine/US. Inflation is not slowing. Corporate profit margins are under siege. Interest rates could be sharply higher before the summer.
All this is not a risky setup.
“If you have something like seven fed funds rate increases in 2022, the price-earnings ratios are going down, and the potential for the stock market going down. I don’t know if we’re talking about 4,000 [for the S&P 500]but we certainly speak less than we do now,” Veteran market strategist Hugh Johnson said on Yahoo Finance Live.
So multiply those weights and eat light.
Possibilities and endings
Super Bowl ads, fast food: Advice to Coinbase to get the world to interact with an expensive Super Bowl ad by slapping a dancing QR code on the screen. To learn more about Coinbase, here’s what the company’s CFO is Tell me about all encrypted things. It’s good to see the e-commerce kid come back from the retirement he started in 2014. Note the end of the commercial that said “Morgan Stanley’s e-commerce.” For those new to the market, Morgan Stanley closed its $13 billion e-commerce acquisition in October 2020. It also returned to the airwaves of the McDonald’s fast food icon in the 1980s. Next Mickey D: The return of Ronald MacDonald during a commercial for the World Championship? Perhaps it is time to welcome Ronald back from exile.
Remaking the New York Stock Exchange: On January 3, Lane Martin walked through the door of the New York Stock Exchange as the 68th president of the famous 226-year-old corporation. Her mission is pretty straightforward, Martin told me in an interview on the NYSE floor (which she doesn’t see going far despite the advent of computers). This is to harness her extensive technical resume (she’s a computer programmer by trade, her first job was at IBM) and focus on ESG disclosures to move the New York Stock Exchange into the future as it competes with Nasdaq for new fees and listings. Martin also has to keep the new listings flowing in the near term as markets deal with rising bouts of volatility as interest rates rise. A colleague in Long Island told me about her outlook for this year’s IPOs, “So I think the first quarter is going to be very quiet, especially for the last first quarter. But I think we’re going to finish the year strong — the pipeline is massive.” My full interview with Martin will be broadcast on Yahoo Finance Live this morning, so stay tuned.
Bargain chatter: I’ve been covering Cisco for quite some time (to that end Julie Hyman and I have done it Fun conversation with John Chambers, longtime former CEO of Cisco), and I have learned that where there is smoke there is often a fire when dealing with gossip as I did Friday night with a $20 billion bid for software company Splunk. I don’t think a deal is imminent based on who I’ve talked to, but it’s very likely to happen. Cisco is an acquisition machine (a strategy first used by Chambers), it has nearly $22 billion in cash, borrowing costs are still low, and Splunk is doing useful things. Splunk also doesn’t have a CEO at the moment yet Doug Merritt passed away In the middle of several weak circles. Seems like an excellent opportunity for Cisco to pounce on it.
“While the news is only speculation at this point, we believe that Cisco is a strategic buyer of Splunk and that the transaction will have a lot of potential synergies. Splunk has more than $2.5 billion in annual cycles today and security represents half of the business. Splunk’s significant presence in Security is a huge opportunity for Cisco, which has been lagging behind other vendors in the security operations space.The other half of Splunk’s monitoring business will be a natural complement to Cisco’s existing monitoring solutions (AppDynamics/ThousandEyes) and can better position Cisco as an end-to-end platform to compete with the rising stars Like CrowdStrike, Datadog, and others, says analyst Brent Thiel at Jefferies.
Expect CEOs to be upfront about this when Cisco reports its earnings on Wednesday. Both companies declined to comment on Yahoo Finance on the report.
‘Dinobabies’ IBM: In the meantime, expect the term “dinobabies” to be used a reasonable amount in the coming weeks on social media and who knows, maybe in a Saturday Night Live skit. The term was reportedly coined by IBM senior executives to refer to older workers who wanted to be fired from the company, According to an in-depth report from The New York Times.
Below is a file Yahoo Finance Plus A graph showing the effect of IBM executives who spend a lot of time in meetings (perhaps discussing dinosaurs) and generally comfortable carts on the company’s stock price. Don’t tweet me and ask me to overlay the IBM chart with Apple or Microsoft, I’m in a good mood. No need for such negativity. One of the reasons I’m so excited is the CEO of AMD Dr.. Lisa Su Returning on Yahoo Finance Live this morning with the company’s $35 billion deal for Xilinx It is expected to close. This is a big deal for AMD, and I look forward to hearing Su’s opinion on what this means for the future of the chip giant.
kohl: And last but not least, activist investor Macellum converts a file Screws in Kohl’s distressed and distressed By nominating 10 new members to the Board of Directors. “We really do see a board of directors that we think is behaving in a somewhat disingenuous way. They seem to be perfectly self-serving, and very holed-in. They seem intent on protecting their jobs on creating shareholder value and exploring ways to create shareholder value,” Jonathan Doskin, CEO of Macellum, told me on Yahoo Finance Live.
dislocation: They are often asked: How do I find great investment opportunities? After I share my standard disclosure, “I no longer pick stocks to make a living,” I tend to follow it up with the phrase, “You want to find the turmoil in the market.” Given my background in fundamental analysis, turmoil represents a situation where today’s stock price – for whatever reason – does not represent the future value of a company.
A possible breakup has emerged at tire giant Goodyear (note I said PossibleGo and do your duty in the company – get started here with their latest earnings release). Shares on Friday fell 27% as the company warned that inflation could continue “for several quarters” and affect the first quarter “significantly”. I get a quick reaction to the market, inflation is high and the Goodyear earnings report arrives after hours 7.5% print CPI address. But the quick sale misses some factors (1) that the large amount of new cars sold during the pandemic will need new tires soon (sometimes the analysis is that simple); (2) The push to electric cars will lead to the entry of new tire technology led by Goodyear; (3) Add Goodyear to the list of manufacturers with pricing power in an inflationary environment (you won’t ride on three wheels because Goodyear tires cost an extra $30 for 2020). Last year, I spent A day at Goodyear’s headquarters in Ohio And we chatted with CEO Rich Kramer – I can tell you that this company has a mindset that does well during periods of inflation and is working on some amazing products.
Graphs to watch: In the “Okay that’s bad” category is the chart below from Jefferies Chief Financial Economist Anita Markowska Explains the effect of higher interest rates on GDP growth. Note the impact starting in the fall, which could mean a rebound in volatility in the markets this spring if one lives by the future stock price adage six months in advance.
More at LPL Financial, the data analysis tool Ryan Dietrick It highlights how the stock market has historically reacted to major geopolitical events such as the one that developed on Friday with Russia that sent stocks lower. Bottom line: Stocks rebounded from these events.
What are you watching today
Before being put on the market
TreeHouse Food (THS) is expected to post adjusted earnings of $0.10 per share on a return of $1.12 billion.
Weber Inc. (WEBR) is expected to report an adjusted loss of $0.07 per share on revenue of $310.71 million
Vornado Realty Trust (VNOExpected to report adjusted earnings of $0.75 per share on revenue of $1.8 billion.
Avis Budget . collection (the cars ) expected to report adjusted earnings of $6.07 per share on revenue of $2.29 billion.
Arista Networks (NetworkExpected to report adjusted earnings of $0.74 per share on earnings of $790.8 million.
Advance Auto Parts (AAP) expected to report adjusted earnings of $1.95 per share on revenue of $2.36 billion.
Yahoo Finance Highlights