The Weekly Drop - November 20th, 2023
Investors have a lot to be thankful for this holiday season 🦃
Good morning investors!
Investors have a lot to be thankful for this holiday season - the S&P is up 17% this year, inflation is finally cooling down, the Fed may finally be done with rate hikes and, most importantly, CMG is running a Thanksgiving sale. I’m thankful for all of your support so now you can join the CMG community for 30% off or you could gift a subscription to a friend or family member for the holidays.
I know there was a lot to keep up with this week but that’s why you subscribe to this newsletter — I cut through all of the BS and give you what you need to know in easy to digest, bite sized pieces of content.
Grab your coffee and let’s dive in.
But first, remember that sharing is caring — if you find this edition of the Weekly Drop informative and valuable, please consider sharing it with your friends and family. Your support is the cornerstone of my growth and the more people that see this the better.
Market Recap
The S&P ended higher for the third week in a row rising 2.5%. Cooling inflation data was the main catalyst for the move as both the CPI and PPI reports showed inflation falling significantly and getting closer to the Fed’s 2% target. Investors now believe the Fed is done with rate hikes and are looking to the possibility of rate cuts early next year.
Aside from the positive inflation data, declining retail sales, rising initial jobless claims and troubling guidance from major retailers further added to recession concerns.
The Fed is in a tight spot right now balancing inflationary pressures and recession indicators. The market seems to think they can manage the risks and safely land the plane. Let me know what you think in the comments.
On top of all the economic news, several major companies also reported earnings:
Home Depot
My prediction from last week:
Home Depot has missed 2 of the last 3 quarters when it came to revenue. At the same time, earnings growth has fell this year. With the strong consumer and reduced inflationary pressure, I tend to think Home Depot surprises and beats estimates in Q3. Guidance will determine how the stock trades. ✅
Home Depot beat on the top and bottom lines and narrowed its guidance. Shares rose 5% on the week.
Target
My prediction from last week:
Data has already shown that the consumer was strong in Q3. I expect that to be positive for Target’s earnings. The key will be guidance, especially as the holiday season is upon us. ✅
Target blew earnings estimates out of the water. Plus the company expects strong holiday-quarter profit due to lower inventory levels and supply-chain cost efficiencies. Shares rose nearly 20% on the week.
Walmart
My prediction from last week:
I don’t foresee any surprises and I expect Walmart to produce strong Q3 numbers. The story, just like the other three major retailers, will be guidance. ✅
Walmart topped Wall Street estimates and while guidance was stronger than expected, comments from CFO John Rainey regarding the consumer and their spending habits spooked investors. Rainey said consumers are acting more cautious with spending as the holiday season gets underway, buying “those things that they need versus the things that they want.” Those comments sent shares tumbling 6%.
Alibaba
My prediction from last week:
Alibaba has found its footing as of late as China’s economy has rebounded, leading to a stronger consumer. Similar to the U.S., China’s Q3 GDP was strong which should translate to Alibaba’s quarterly earnings. ✅
Alibaba beat on the top and bottom lines, announced a dividend and repurchased $1.7 billion of its stock. While the report was very strong, the company announced that it would be shelving the spin-off of its Cloud Intelligent Unit. Investors didn’t like the news and shares fell roughly 5%.
Palo Alto
My prediction from last week:
Palo Alto’s fiscal Q1 tends to be its hardest quarter but I don’t think Palo Alto will have any issues meeting estimates. The theme of the quarter has been guidance and I actually think the guidance will be strong. But it is important to note, valuations are very high for the company and any miss or reduced guidance will be punished. ✅ ❌
Palo Alto’s earnings and revenue were above expectations, however the company revised second quarter guidance lower. Full year guidance was above consensus numbers but the reduction in Q2 billings estimates was a surprise. The stock was only slightly punished, falling 1.5%.
Discord
As always, if you want to see a breakdown of all the earnings and economic reports from last week, head to my Discord. Here’s a sneak peek:
The Week Ahead
A holiday shortened week is ahead, which means we may finally get that reprieve we’ve all been waiting for. There are some major names on the earnings calendar while the FOMC minutes and PMI data will be in focus on the economic front.
Earnings Reports
Nvidia tops the earnings calendar this week, while retailers Lowe’s, Kohl’s, and Best Buy will give us clearer insights into the consumer.
As I have been saying all earnings season, there should be no surprises for the last quarter. The consumer was strong, the economy was chugging along and the reports should continue to indicate that. But pay attention to the forward guidance, that is the key.
*Note - I will be creating one page summaries for key reports. Be sure to follow me on Twitter.
Let me know in the comments what stocks you are watching.
And be sure you don’t miss anything by joining the Discord.
Economic Reports
This week is shortened thanks to Thanksgiving and the list of economic reports is just as short. Existing home sales, FOMC meeting minutes, initial jobless claims, consumer sentiment and PMI data is all there is this week. It will be a welcome break from the onslaught of data recently.
Again, be sure you don’t miss anything by joining the Discord. I provide full breakdowns of every report as they are released.
What CMG is Watching
It’s time for the moment you have all been waiting for - exactly what I am watching in the week ahead and how I’m playing it. Unfortunately, this is only for the premium subscribers.
If you haven’t joined the CMG community yet, what are you waiting for?
By joining the club, you get all of the premium articles here on Substack, immediate entrance into the community chat, plus access to all of the locked content on Discord!
As I like to say, price is what you pay value is what you get. With the 30% off sale for Thanksgiving, you’re not getting this much value for the price anywhere else on the Internet. Join the club today!
If you aren’t sure if this community is right for you, there’s a free 7 day trial. Dip your toe in and test the waters today — you’ll be glad you did.
Keep reading with a 7-day free trial
Subscribe to CMG Venture to keep reading this post and get 7 days of free access to the full post archives.