In his Daily Market Notes report to investors, Louis Navellier wrote:
Fed Fear Eases
Stocks are grinding higher as fear of Fed eases and growth is still forecasted.
Stocks are higher across the board modestly and the VIX is lower this morning. The market seems more comfortable that higher interest rates will not derail earnings into a serious recession anytime soon.
Not that earnings estimates aren’t already coming down meaningfully: On July 1st, 3rd quarter S&P earnings were forecasted to grow 11.1%, now it’s 5.6%. Fourth quarter estimates have fallen from 10.6% to 6.4%.
These are far from the seriously negative estimates that a real recession would bring. Until estimates come down meaningfully into the red, the bias remains to be long the market.
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The Fed is probably going to stop short of 4% in Fed Funds by year-end and wait to see what happens with that level in combination with the balance sheet reductions, a factor that the market can only guess at since it's happened only once before.
Starting next month, the plan is to run off $60B in Treasuries and $35B in mortgages each month, double the existing plan of half those amounts, though the Fed actually only reduced by less than half that amount, $22B in July.
Unlikely Housing Crisis
Higher long-term interest rates will continue to pressure the housing market but with home equity at all-time highs, it's unlikely to create a crisis
Much like the historically low unemployment and high job listings restrain the likelihood of a crash in consumer spending from a spike to double-digit unemployment.
No U.S. Recession
Helping the mood today is more stimulus being announced in China and positive markets in Europe.
There's more fear of a global recession than one in the US as most central banks are tightening monetary policy in concert, which is challenging the international earnings of US companies, amplified by the very strong US dollar.
Important earnings of Salesforce (NYSE:CRM) were another case of a beat top and bottom but the guiding down full-year estimates resulted in a drop of 6% in the stock this morning.
NVIDIA (NASDAQ:NVDA) missed top and bottom and also guided down but the stock is actually up 3% because the weakness was focused on its gaming sector while the data center business remains strong.
Likewise, cloud-focused Snowflake (NYSE:SNOW) reported very strong sales growth, though still negative earnings, and is up 21%, lifting most cloud software companies today.
Continue to add earnings growth on pullbacks and trim most high flyers on rallies.
Coffee Beans
The metropolis of Shenzhen in the southern Guangdong province of China has the most skyscrapers measuring over 200 meters tall of any city in the world with a total of 120, followed by Dubai with 107.
New York is the only U.S. city to make it into the top 8, with 92 skyscrapers that reach over 200 meters. Source: Statista. See the full story here.
