An old stock market adage suggests that investors “Sell in May and go away”. The first part of that saying held true, at least for the first couple of days of the new month.
The move was likely driven by profit-taking, as the S&P 500 index ended April, closing Tuesday at a record high. The FOMC also poured some water on the rally Wednesday, as comments with the latest interest rate decision talked down expectations for an interest rate cut.
On the other hand, Friday’s April jobs report was a win for the bulls. The U.S. economy added 263,000 non-farm payrolls in the month, which was well ahead of the estimate of 190,000. The headline unemployment rate also fell to 3.6%, which is the lowest level in 50 years. In addition, results from the previous two months were revised higher by 16,000 jobs.
The run higher the past couple of weeks was largely driven by relatively strong quarterly earnings, against muted expectations. 75% of companies in the S&P 500 have exceeded profits expectations so far this quarter, which is above the historical average. The best growth has been from the healthcare sector, while energy names have been a drag on overall growth.
Speaking of energy, crude oil is at its lowest level in a month, on concerns arising this week of growing global supply. According to the following chart from the Bespoke Investment Group, the sector appears oversold and could hold some value relative to the overall market.
Source: Bespoke Investment Group
Earnings Reports Drive Market Movers
Alphabet (GOOGL) was a big earnings-related loser this week. The company fell 8% a day after missing quarterly revenue expectations. On the other hand, Apple (AAPL) gained 5% the day after exceeding consensus analyst estimates.
Beyond Meat (BYND) was a hot IPO on Thursday. The plant-based food producer gained more than 163% out of the gate, in its first day of trading.
The Week Ahead
Looking ahead to next week, first-quarter earnings season wraps up, highlighted by the following companies:
On the economic front, all eyes will be on inflation, with producer prices reported on Thursday, followed by the consumer price index on Friday.
With the bulk of earnings season behind us and a Fed rate cut seemingly off the table, the question looms: what are the next potential catalysts for the market?
Now that U.S. stocks are up 17% year-to-date and valued back above 17x expected full-year earnings, is this the year to “sell in May and go away?”
Timing the market is a difficult task for any investor, but two things that never go out of style are growth and dividends. My colleague Brett Owens has devised a strategy that combines the best of both worlds, allowing investors to benefit from both growth and income.
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Today, we want to share seven of Brett’s top stocks. These names should generate double-digit annual returns, regardless of the direction of the broader market.
Now, these won’t be the highest yielding stocks in the market. That notion will cause you to become ensnared in too many value traps.
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You need to generate steady earnings and cash flow to accomplish this. Cash that is also often returned to investors through share repurchases.
Add in a stock that’s down from its recent highs, or better yet, valued at a discount to its growth rate, then you’re on the path to discovering the upside potential that Brett will help you find with Hidden Yields.
Please click here to learn the names of our seven favorite dividend stocks with 100%+ upside. Brett will share their names, tickers and his full research with you including recommended buy-up-to prices.