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Great News For Energy Stocks

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

The CPI report rattled the market. Treasury yields have soared. In my opinion, the Fed should raise key interest rates 100 basis points next week to get more in line with market rates. The more they raise rates next week, the more likely they’ll have a more dovish FOMC statement.

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Upcoming Bounce?

When we get big selloffs such as yesterday's, the market is usually about 4% higher a month later and nearly 7% higher, three months later. If history repeats, we should bounce on Wednesday and be higher a month and 3 months from now.

Nasdaq Composite

Inflation is still running hot. You need to have a lot of money in inflation stocks which include energy, food, fertilizer, shipping companies, and semiconductor production companies that are helping with all the onshoring and the semiconductor production that the administration and Congress are pushing.

There are oases out there, but we are going to have some sloppy earnings for the next two quarters for the S&P, specifically the multinationals that are being punished by a strong U.S. dollar because they are getting paid in eroding currencies. So, I recommend investing in more domestic companies.

Load Up on Energy

The Labor Department on Wednesday announced that the Producer Price Index (PPI) declined 0.1% in August, which was in line with economists’ consensus estimates. Wholesale energy prices declined 6% in August, while wholesale food prices were unchanged.

The core PPI, which excludes food, energy and trade margins, rose 0.2% in August. In the past 12 months, the PPI and core PPI have risen 8.7% and 5.6%, respectively.

One reason that energy prices have fallen is that the Biden Administration has been steadily depleting the Strategic Petroleum Reserve (SPR) by 1 million barrels per day since March. According to the Energy Department, the SPR in the latest week now stands at 434.1 million, which is the lowest level since October 1984.

Bloomberg reported on Tuesday that the Biden Administration is considering refilling the SPR when crude oil prices dip below $80 per barrel. This effectively puts a floor under the crude oil prices, which is great news for energy stocks.

The other thing is Europe is still looking for its energy supplies. They like to say they've got enough for this winter, especially for natural gas, but they're definitely looking for supplies for next year. So between the Biden administration wanting to refill the SPR, and Europe looking for more energy next year because they're cutting off Russia, things are looking very good in the energy patch.

The other big news is expected to be Thursday’s August Retail Sales report. We want to see that retail sales are running faster than inflation. We want to make sure that consumers are spending money.

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Louis Navellier

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