Target Beats Top And Botto, Gives Cautious Guidance

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In his Daily Market Notes report to investors, Louis Navellier wrote:

Attractive Cash Yields

February comes to a close, taking the wind out of January’s sails on higher Fed fears.

The Dow is negative 1.2% for the year, which is a bit counterintuitive in that it is the most conservative broad index, made up of huge, well-established companies. The S&P 500 remains up 4% YTD, the NASDAQ up 10.5%, and the Russell 2000 up 8.8%.

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Growth expectations remain, as reflected in the more speculative Indexes. Perhaps, it also says Dow investors are more likely to shift funds into the higher cash yields now available.

The gravity of the Fed's intentions continues to increase as more analysts see the Fed having to go as high as 6% on Fed funds to hope to get inflation down anywhere close to their 2% target. Today's economic data showed continued weakness in manufacturing and a drop in consumer confidence.

It's still difficult to imagine a recession with unemployment at 50-year lows, even with soon-to-be 7% mortgage rates. If it comes we will have plenty of advanced notice.

Confident Companies

Supporting the market no matter what the Fed does is rising stock buybacks and dividends. 2022 was a record year of stock buybacks; $930B, +5.5% over '21. Dividends of $536B were up 6.4%.

This year we may hit a trillion in buybacks and dividends may rise another 5%. These numbers take strong cash flows to support, indicating confidence by management teams of no near-term slowdown, at least in the companies driving these numbers.


Cautious Retailers

As the day progresses, all the major stock indexes except the Dow are essentially flat, as are the VIX, interest rates, and commodities. Today, Target (NYSE:TGT) reported beats top and bottom, and a reduction in inventory, but also gave cautious guidance, joining the chorus of other retailers this earnings season.

We've now gone 287 days without a new high in the S&P, the longest streak since 2016. It's understandable that investors are also cautious and increasingly find the highest cash yields in years attractive.

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