Interest Rates and Inflation are two major problem areas for the market. The interest rates are heading higher, with the yield on the 10-year US Treasury note now rising past 2.8% to its highest yield in four years. The Russia Ukraine war continues to make the inflation problem worse. Today, Corn prices hit 9-year highs. The market is struggling to get some dose of good news but nothing seems to be working right now.
There is nothing to cheer this market up except extreme pessimism on the street but is that good enough. We cannot even say that the market has priced in all the bad news.
The Twitter drama continues
Elon Musk buys a 9% stake. It results in a big gap up opening. Elon Musk then offers to buy Twitter at $54. The Twitter Board rejects the offer. And now Apollo Global Management offers to finance the deal. The drama continues and the stock keeps getting support at $45. The most exciting part – Jack Dorsey, the founder and former CEO of Twitter, seems to agree with Elon Musk.
Bank of America – Earnings support near 52 week Low
Bank of America came out with a decent earnings report and the stock has bounced from the lows. Bank of America’s net interest income, which includes the money it makes on loans, rose 13% from a year earlier to $11.57 billion. The Good news is that Bank of America is issuing new loans and each of the business segments seems to be doing well. Will it help the stock to rally more? It depends on the market condition. It’s definitely a better bank in the peer group.
Surprising aspect: Mortgage originations. Rising rates have reduced mortgage demand at JP Morgan (37% decline); Wells Fargo (27% decline) but that has not been the case with Bank of America. It saw a 7% jump from a year-ago period.
AT&T continues to be a Value play
AT&T started a new journey as a standalone company on April 11, 2022. On April 8, the company officially spun off Warner Bros. and completed the media group’s subsequent merger with Discovery. AT&T since April 11 is a pure telecom play. The company also announced the new dividend policy and at the CMP, it offers a dividend yield of 5.6%. In the current market environment, the market loves value stocks.
The company is set to report earnings on April 21, 2022. The big question is – Will it sustain the Gap post-earnings?
The Big winner in 2022: Crude Oil exploration plays like Occidental Petroleum OXY
There is always a bull market somewhere. Occidental Petroleum OXY stock broke out in January 2022 above the levels of 35.5. Now 3 months later, the stock is at 61. It’s a 75% rally.
Crude Oil prices above $100 mean the company will post monster profits but the question that everyone seems to be asking is – Is the stock done with the rally? The answer is No. The stock will find buyers on dips somewhere near $50.
Will Revenge Travel benefit Airline companies?
US Federal Judge has now even ordered the end of mask mandate for Airlines. Last week, most Airline companies confirmed that there is strong travel demand even at elevated pricing. People have not traveled during the last 2 years and now everybody wants to go out and meet their friends, relatives, and places. This augurs well for Airline stocks. The ETF for Airline companies JETS has resistance near 22.
Will it break out? I will bet on that possibility. JETS is a buy even in the current market environment.
Bad Equity Environment is hurting Charles Schwab
Charles Schwab announced disappointing earnings and the stock reaction was brutal. Although the company increased interest revenue in the quarter by $300 million on a year-over-year basis, trading revenue fell by more than $250 million. Also, Expenses rose 3% in the quarter from the first quarter of 2021
Every large brokerage firm has seen a decline in trading revenues.
Cleveland Cliffs CLF – The stock in a Bull market
I love when stocks break out to new highs for fundamental reasons and sustain there. CLF broke past $26 and seems to be consolidating in $29-$32 band. The stock looks like a buy near $30
The company is expected to release the earnings report on April 22, 2022. Will that drive the stock higher?
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers
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