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The Fed went big!

Everyone knew Jerome Powell and company were going to (finally) cut the federal funds rate for the first time in four and a half years on Wednesday. The question was by how much – 50 basis points (0.50%) or 25 basis points (0.25%)? To my mild surprise (but not to Wall Street’s – the options market had swung to a 59% probability that it would be 50 bps prior to the announcement), the Fed opted for the larger cut, slashing rates from 5.25-5.5% to a 4.75-5.25% range. So far, the market seems unsure how to take the hefty cut – all three major indexes were up more than half a percent immediately following yesterday’s 2 p.m. ET announcement, but then were narrowly in the red by day’s end.

It’s officially a correction. The S&P 500 fell 10% below the 52-week high on a closing basis last week. Now what?

As usual, all eyes are on the Fed. The Central Bank will decide on interest rates on Wednesday. Also, this week are earnings from Apple (AAPL) and several other large companies and another jobs report on Friday. But the Fed should be the main event.

The S&P 500 index, of course, is the most widely used benchmark for stock market returns. Individual investors, financial media and those overseeing complicated institutional portfolios use this metric as their core measure of absolute and relative performance.

Professional investment consultants may take umbrage with this statement. These highly trained analysts are well-versed in the intricacies of quantitative analysis and can parse portfolio returns, relative to potentially hundreds of alternative benchmarks, into dozens of marginally relevant categories down to the 8^th decimal place.

“[Directory and communications services provider] Neustar, Inc. (NSR) said September-quarter earnings per share jumped 31% to $0.51, topping the consensus of $0.44. Revenue increased 18% and also exceeded the consensus. Management raised its full-year outlook. Per-share earnings should range from $1.76 to $1.84, implying at least 16% growth. “Revenue...

Defense contractors have been beaten down for years, but several of them now look like good turnaround stocks. These six appear intriguing.

There have been a lot of interesting developments in the market over the past week, with the lower-than-expected inflation reading and resulting speculation over the Fed’s next move right near the top of the list.

As it stands now, the market is saying no more Fed rate hikes, and even that we’ll see two cuts by next July.

Frankly, that seems a bit aggressive.

I didn’t have a strong business agenda for my visit to China. The real purpose was to put a face on the place, so to speak. I was fortunate to hear lectures by people with extensive China experience and to go on a couple of interesting factory visits. But the investing system used by the Cabot China & Emerging Markets Report doesn’t make a lot of use of the kind of “look-them-in-the-eye” analysis of management that is popular with large institutional investors.

Today, one investment strategy that’s struggling a bit is the value strategy. While growth stocks in general have had a great year, and international investments have had a great year, thanks in part to the falling dollar, value investing strategies have lagged.

Why would you want to invest in a hard disk maker? Because historically, these companies have provided many opportunities to make big money quickly, and it looks like we’re entering one of those periods today.

For almost everything we buy in life, price matters. From gasoline to automobiles, cheeseburgers to chateaubriand, we’ve learned that the lower the price, the better the deal.

The Facebook/Meta stumble will weigh on markets today as we await earnings on Amazon (AMZN) and Ford (F). Explorer stocks did well this week as markets continue to be volatile. Total electric vehicle sales in 2021 including hybrid vehicles doubled the number from 2020, which brings us to the Explorer’s new recommendation.

Earlier this week, we moved shares of a consumer staples company from Buy to Sell. We comment on earnings from two recommended stocks and comment on other recommended names. Some thoughts on the ESG trend.

The S&P 500 has now regained more than half of what it lost in the bear market selloff. We are still in the midst of a six-week rally, although it has leveled off in the past few weeks. What can you expect going forward?

The S&P 500 is now up over 40% from the bottom in March and less than 10% from the all time high. Forget about a bear market. It’s not even a correction any more.

This week a number of Explorer stock retraced last week’s gains, with a major exception being the explosive 45% surge in Virgin Galactic (SPCE) on top of its previous week’s 25% surge. It appears that key test flights are forthcoming as well as more space mania and space ETFs.

I think it’s fair to say most market observers were not surprised that stocks retreated in late-2018.