It might be tempting to buy the dip. After all, the S & P500 has declined more than 15% since its August peak and is around 25% off its January high. But one investor cautions that now might not be the time. “It’s a bit early to go back into the market, according to our modeling and evaluation,” says John Ricciardi, head of asset allocation at Deuterium Capital. Ricciardi said he would want to see three metrics turn favorable to find “good risk-asset returns”. These are: earnings growth, falling borrowing costs, and global liquidity — and he says all three are currently missing in equity markets. Excluding the energy sector, earnings estimates for the third quarter are already down 2.6% compared to the previous three months, according to Refinitiv. With high inflation and rising interest rates, Ricciardi says stock market valuations will need to fall further before buyers return. “We’ve had about 25% off this year in global markets, and that’s the beginning of a bear market. But quite often, we’ve seen more than that before you get to a bear market bottom.” Riccardi said investors should be selling stocks in the technology, discretionary, and communication sectors because they all rely on increased consumer spending – which the Federal Reserve is trying to lower by hiking interest rates. He also said industrial output would likely see an “unexpected drop,” along with a collapse in retail sales by 8% over the next three months, both of which could drag equities lower in the near term. What should investors buy? Ricciardi said investors should reposition toward stocks sensitive to interest rates – the so-called defensive stocks – and identified companies in the consumer staples sector. Procter & Gamble , Coca Cola and Pepsi Co were among the stocks he thinks might fair well while interest rates continue to increase. Procter & Gamble has, on average, a buy rating from analysts with a price target 24% higher than the current share price, according to FactSet Estimates. However, Goldman Sachs analyst Jason English downgraded P & G to neutral on Monday on concerns over the company’s exposure to non-U.S. dollar earnings at a time of dollar strength. Ricciardi, who is also a fund manager at Deuterium, suggested Dominion Energy , NextEra and Duke Energy in the utility sector and Air Products and Sherwin-Williams in the “small corner” of the materials sector. FactSet data shows that Dominion Energy and NextEra are buy-rated by analysts, on average, with 37% and 29% upside, respectively, to their share price from current levels. Duke Energy had a hold rating, on average. Andrew Bischof from Morningstar’s equity research team was the sole analyst with a sell rating on both NextEra and Duke Energy.
Tag Archives: Dominion Energy Inc
American Airlines, Nucor, Goldman Sachs and more
Bundles of steel from Nucor Corp. sit for sale to at Thompson Building Materials in Lomita, California, U.S., on Thursday, Aug. 30, 2012.
Patrick Fallon | Bloomberg | Getty Images
Check out the companies making headlines in midday trading.
American Airlines, United Airlines, Delta Air Lines — Shares of American Airlines the major airlines rose over 1% Monday after the White House said it would ease travel restrictions for international travelers who are vaccinated against Covid-19. Shares of Delta and United gained earlier but ticked down nearly 0.2% each.
China Evergrande Group — Shares of the embattled Chinese property giant dropped 10% on the Hong Kong Stock Exchange. The company has been scrambling to pay its suppliers, and warned investors that it could default on its debts. Last week, the company said its property sales will likely continue to drop significantly in September several months of weakness.
Centerpoint Energy, Dominion Energy — Utility stocks rose on Monday as investors shifted toward defensive plays during the broader market slide. Shares of Centerpoint and Dominion rose roughly 1% each.
Nucor, Freeport-McMoRan, Ford, Caterpillar — Stocks linked to global growth declined Monday. Steel stock Nucor declined 8.4%, miner Freeport-McMoRan fell 6.6%, auto maker Ford dropped 6% and construction equipment manufacturer Caterpillar retreated 4.8%.
APA, Devon Energy — Energy stocks tumbled amid a drop in oil pries on concerns about the global economy. The S&P 500 energy sector fell 3.3%, becoming the worst-performing group among the 11 groups during Monday’s market sell-off. APA and Devon Energy both shed more than 6%. Occidental Petroleum dropped 6% and Hess slid over 5%.
Goldman Sachs, Bank of America, JPMorgan Chase — Financials stocks declined as the U.S. 10-year Treasury yield dropped, with falling rates typically crimping bank profits. Goldman Sachs, Bank of America and Citigroup all shed more than 4%. JPMorgan Chase and Morgan Stanley both declined more than 3%.
ARK Innovation, Coinbase, Tesla, Zoom, Square — Shares of Cathie Wood’s flagship fund dropped more than 4% as innovation names experienced harsh selling. Top holdings Coinbase and Teladoc both lost more than 5%. Unity Software shed over 5%, and Tesla dropped more than 3%. Square and Zoom Video dropped more than 3% each.
Pfizer — The drug maker stock ticked 0.3% higher after the company said its Covid vaccine is safe and appears to generate a robust immune response in kids ages 5 to 11. If the FDA spends as much time reviewing the data for that age group as it did for 12- to 15-year-olds, the shots could be available in time for Halloween.
AstraZeneca — Shares of the United Kingdom-based pharmaceutical company popped more than 4% in midday trading after announcing that its breast cancer drug Enhertu showed positive results in a phase-three trial.
Invesco — Invesco shares declined 9% Monday. The stock ran up on Friday following a Wall Street Journal report that the asset manager is in talks to merge with State Street’s asset management unit. The report, citing people familiar with the matter, said a deal is not imminent and might not happen at all.
— CNBC’s Maggie Fitzgerald, Yun Li and Jesse Pound contributed reporting
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