The yield curve has been inverted for more than a year. But over the past few months, the inversion isn't so steep. This has important implications for the economic outlook. Back in April 2023, two-year Treasury note yields were about 100 basis points above 10-year yields. Now that gap is 23. There are a few reasons for this, and they point to an upcoming shift toward a normal upward-sloping curve in the next few quarters, in our view. First, U.S. economic trends have been positive. Fixed-income investors have moved away from fears of deflation and are again seeking a premium in yields versus inflation. That has lifted rates across the yield curve. Second, the Federal Reserve finally is in front of inflation and now is building a cushion, or a gap, between fed funds and core PCE in order to push inflation back toward 2.0%. This is all well and good. But if the Fed's gap is too wide for too long (we think a 200-basis-point gap is desirable, versus the current gap of 277), the central bank risks tipping the economy into a recession, which is presumably what the inverted yield curve has been signaling. Fed Chairman Powell has explained that he and his colleagues want to continue fighting stubborn inflation, so they are likely to keep short-term rates high for a period of time -- which is where the markets are now. But the day will come when the data shows that the central bank has inflationary pressures under control, and the Fed will start to lower rates in order to keep the economy growing. We think that first rate cut will be in September, with a second cut after the U.S. presidential election, and two more cuts in 1H25. Assuming those lower rates keep the economy in a growth mode, longer-term rates should remain stable and the yield curve should once again slope upward.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Not only Wall Street but the entire nation will continue to monitor developments this week related to the attempted assignation of former President Donald Trump. In other news, earnings season moves into high gear and Fed Chairman Powell speaks publicly again. Wall Street will continue to ponder if a first interest rate cut is likely in September, as the case for such a move seems to be building. Last week, the Dow Jones Industrial Average was up 1.6%, the S&P 500 gained 0.9%, and the Nasdaq was higher by 0.3%. Year to date, the Dow is higher by 6%, the S&P is up 18%, and the Nasdaq is higher by 23%. On the economic calendar, Chairman Powell speaks on Monday in Washington, D.C. and his remarks will be telecast live. He spoke on Capitol Hill last week, but those comments were before key data showed inflation slowing on the consumer side. On Tuesday, Retail Sales data is due. On Wednesday, Housing Starts, Building Permits, Industrial Production, and Capacity Utilization all will be updated, as will Leading Economic Indicators on Thursday. On the earnings calendar, the new reporting season kicks into high gear this week. On Monday, Goldman Sachs and BlackRock report. On Tuesday, Bank of America, Morgan Stanley, PNC Financial, UnitedHealth, and J.B. Hunt Transport. On Wednesday, Johnson & Johnson, United Airlines, and U.S. Bancorp. On Thursday, Netflix, Taiwan Semiconductor, Abbot Labs, and Domino's Pizza. And on Friday, American Express, Travelers, and Halliburton. Only 5% of S&P 500 companies have reported so far. General expectations are for 8%-12% earnings growth for 2Q. This follows 8% growth in 1Q and 10% growth in 4Q23. At Argus, we forecast EPS growth for all of 2024 coming in at roughly 8%-9%. Last week, there was good news on inflation. CPI was 3.0% for June, down from 3.3% in May. Core CPI dipped to 3.3% from 3.4% in the prior month. On the producer side, the news was mixed. PPI picked up to 2.6% in June from 2.4% in May, but core PPI slowed to 3.1% from 3.3% in the prior month. Mortgage rates fell to 6.89% for the average 30-year fixed-rate mortgage. Gas prices rose a penny to $3.49 per gallon for the average price of regular gas. The Atlanta Fed GDPNow indicator is forecasting for 2Q and calls for expansion of 2.0%. The Cleveland Fed CPINow indicator forecasts 3.01% for July CPI. The next Fed rate decision comes on July 31, with odds at 6% for a cut. By mid-September, there is a big jump in the odds to 96%. This spike follows the good news on inflation last week and the jobs report the week prior. By November 7, the odds are at 99%, and for December 18, odds call for a second cut according to the CME FedWatch Tool.

Our rating on the Financial sector is Over-Weight. The Fed's rate-hike campaign is expanding net interest margins for banks. We also look for recovery in fee-based businesses, bond issuance, and M&A as the rate cycle winds down. Still, with inflation running hot, companies may cut back on hiring and investments, and thus on business loans. As of the end of April, the sector accounted for 13% of the S&P 500. The sector was outperforming the market with a gain of 12.0%. It underperformed the market in 2023, with a gain of 7% compared to a gain of 24% for the S&P 500. The sector includes money center banks, regional banks, investment banks and brokerages, exchanges, insurers, and financial data companies. Here are the Financial companies that either are on our Focus List or are used in our model portfolios.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Strong First Quarter but Market Technicals send Red Flags

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Weekly Tee Up: Bank Earnings and Housing

The 10-year Treasury yield rose 83 basis points (bps) on October 16; the five-year yield popped 73 bps; and the two-year rose five bps. Yet to everyone's surprise, the stock market posted some very nice gains that same day. There are times when investors start to ignore (or simply get used to) conditions that have been bothering them for months and start trading stocks on their merits. Still, even with the recent increase, yields have not yet reached recovery highs. With third-quarter earnings season upon us, investors now have something else on which to focus.

Can the major indices rally when the largest stock (Apple, AAPL) declines? AAPL was smacked by 4.8% on Friday and pulled the major indices lower. Yesterday, AAPL fell another 1.7%, but the major indices posted decent gains. By the way, AAPL is 7.5% of the S&P 500 and 11% of the Nasdaq 100. AAPL lost its 50-day average on Friday, the first time the stock has been below that average since January. It's been quite a run, from $125 early this year to $196 at the end of August; since March, the stock has been in a steady advance, getting support from its 10-day and 21-day exponential moving averages (EMA) the entire time.

We have raised our intermediate-term technical outlook to neutral. The Teflon stock market continues to crawl higher in the face of bearish daily momentum divergences and, in some cases, extreme bullish sentiment. This is typical action in the early stages of a bull market. However, it took 164 days for the S&P 500 (SPX) to gain 20%, far longer than almost every other bull market in the past -- so we thought we were dealing with a market that might remain range bound. That hasn't been the case, as the major indices have dealt extremely well with some key areas of chart resistance as well as various important Fibonacci retracement levels.

The S&P 500 (SPX) continues to trend toward several important pieces of resistance following the rally off the March 13 intraday low of 3,809. First, the SPX is right at trendline resistance off the peak since August. Back in the latter part of February, the index had broken down out of a bearish wedge, backtested the lower line of the pattern, and continued lower. From the February 2 closing high to the recent closing low, the index gave up almost 8%, or 324 points. Based on the size of the wedge, a minimum target was down at 3,656 -- which the index didn't come close to hitting.

The stock market isn't making it easy for the bulls or the bears. After finally clearing resistance at 4,100 and rallying up to 4,195, the S&P 500 (SPX) has done an about-face, dropping back below 4,100.

"Well, well, well," said the Bear to the growing number of Bulls. "Not so fast." On Wednesday, another trip to the 200-day average by the S&P 500 (and almost to the bear-market trendline) ended at a large "Do Not Pass Go" sign. As many know, that sign also reads "Do Not Collect $200," in this case a reference to the 200-day average. The SPX gave back 1.6%, the Nasdaq shed 1.2%, and the QQQs dropped 1.3%. Both the S&P 400 and the Russell 2000 ran smack into chart resistance from their recent highs in November and December, and did a 180.

Weekly Tee Up: Earnings, Inflation, Housing, Fedspeak

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Stocks continued to rally on Tuesday morning as investors weighed more 3Q earnings reports. Goldman Sachs rose more than 4% after posting stronger-than-expected third-quarter revenue and earnings and announcing a business reorganization. Johnson & Johnson shares fell slightly despite above-consensus results and an increase in the company's full-year EPS forecast. The Dow rose 1.3%, the S&P 1.2%, and the Nasdaq 1.2%. Crude oil fell nearly 3% to $83 per barrel, while gold fell $9 to $1655 per ounce.

This pick list highlights constituents of the Morningstar US Mid Cap Index that we believe offer investors the best risk-adjusted return prospects. The market capitalization range for U.S. mid-caps typically falls between $1 billion and $8 billion and represents 20% of the total capitalization of the U.S. equity market.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Last week was the busiest of the quarter for earnings, with many sharp stock-price moves following above- or below-consensus results or changes in guidance. Through July 26, Refinitiv noted that 133 S&P 500 companies had reported earnings, with 76% beating expectations, above the long-term average of 66%. The blended (actual for those reporting and consensus for those still to report) growth rate is 6.2%, near the 5.6% expectation and indicating the "beats" have not been robust. But the sour mood coming into the quarter is being greeted with relief that profit shortfalls and lowered guidance are not rampant. Our analysts always look for companies that boost outlooks during earnings season. Raising guidance can be a catalyst for strong returns in the quarters ahead. Here is an initial list of BUY-rated companies in Argus coverage with raised guidance or increased outlooks during the 2Q22 EPS reporting season.

The trading week ended July 15 featured some terrible inflation data (CPI, PPI). While the stock market was weak following these numbers, the indices all saw nice intraday recoveries and then rallied hard on Friday of the week. All the major indices were down for the week, but it could have been a lot worse based on only the headlines. As we have said before, the numbers don't matter as much as the reaction to the numbers -- and that was positive (and certainly a change in recent character for the market).

Dividend income, an important element of total return, is often overlooked amid gyrations in the stock market. Between 1930 and 2012, dividend income accounted for 42% of the total return of the S&P 500, according to Hartford Funds. And that's just the average. In some decades, dividends accounted for more than 50% of total returns and even 100% of returns. More recently, dividends have accounted for 15%-20% of returns. Still, in 2018, dividend payments softened the blow when most market indices declined as the Federal Reserve hiked rates. The pattern is being repeated in 2022 as well. Not all dividends are created equal, though, and it is important to understand the difference between the two main categories: high-yield stocks and dividend-growth stocks.

This is among our most important themes for 2022, and stretches across industries. We think companies that consistently raise their dividends at a double-digit rate are sending off three important signals amid the recent market volatility: 1) the company's balance sheet is strong enough to pay a dividend; 2) management is focused on providing shareholder returns; and 3) management is confident enough in the near-term outlook to raise the payout aggressively. The third factor is especially important as the pandemic upended the nation's recent record of long-term economic growth. Here are 19 stocks that meet our double-digit dividend test and are on the Argus BUY List. They are also holdings in our Dividend Growth Separately Managed Account and in the Dividend Growers Total Return Trust, sponsored by SmartTrust.

Dividend growth is among our most-important themes for 2022. We think companies that raise their dividends consistently at a double-digit rate are sending three important signals: the company's balance sheet is strong enough to pay a dividend; management is focused on providing shareholder returns; and management is confident enough in the near-term outlook to raise the payout aggressively (especially important during a pandemic). On average, the dividends of the companies in the S&P 500 have grown 2.0% per year since 1970. The growth rate has been negative during economic slowdowns in the early 1970s and 1980s and 1990s; during the bear markets of 2000, 2008 and 2009; and during the pandemic. On the flipside, double-digit dividend growth is rare. Only in five of the past 50 years has the average dividend growth rate been 10% or above. More recently, dividend growth accelerated to 9% in 2019, which was a good year for stocks as trade wars calmed and the Fed took a dovish stance on interest rates. But dividend growth slowed sharply in 2020 due to the pandemic, with the rate turning negative. At this stage of the economic and market cycles, Argus recommends that investors focus on dividend growth instead of dividend yield. Specifically, we are bullish on companies that have boosted their dividend consecutively at high growth rates for many years.

Stocks fell sharply on Friday morning, a day after Fed Chair Jerome Powell said that a 50-basis-point rate hike would be 'on the table' in May. The comments contributed to a sharp afternoon selloff on Thursday. On the earnings front, American Express shares fell despite stronger-than-expected 1Q earnings, as the company did not raise its full-year guidance. Verizon shares also fell after the company said that 2022 earnings would come in toward the low end of its previous guidance range. The Dow fell 1.4%, the S&P 1.2%, and the Nasdaq 0.8%. Crude oil fell to $102 per barrel, while gold traded near $1929 per ounce.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Apollo Global Management Inc (APO); T-Mobile US Inc (TMUS); Procter & Gamble Co. (PG); Lam Research Corp. (LRCX) and the Focus List deletions are Corning, Inc. (GLW); Bank of New York Mellon Corp (BK); Monster Beverage Corp. (MNST); Netflix Inc (NFLX).

Stocks pared sharp early losses on Friday morning amid mixed fourth-quarter earnings, as interest rate uncertainty continued to weigh on sentiment. Netflix shares plunged more than 20%, despite better-than-expected 4Q earnings, after the company projected that it would add 2.5 million streaming subscribers in 1Q, down sharply from the fourth quarter and well below the consensus forecast of 5.9 million. The Dow fell 0.1%, the S&P 0.4%, and the Nasdaq 0.7%. Crude oil fell slightly to $85 per barrel, while gold traded near $1835 per ounce.

As Earnings Roll in, the Economy Rolls on

The volatile action that started with Monday's big decline continued on Thursday, with the stock market erasing losses from earlier in the week. Wasn't this specific week in September supposed to be the weakest of the year?

A "taper tantrum" in the stock market is finally in the books, so maybe we can all stop talking about it. If anyone in the business did not see this coming, they've been sleeping under a rock. The Federal Reserve will still be pumping liquidity into the marketplace most likely until 2022. When they finally get around to actually tightening, we will all have even more gray hair. Interest rates along the whole curve, from the two-year Treasury note to the 30-year bond, did very little following the news.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Bank of New York Mellon Corp (BK); Alphabet Inc (GOOGL); Emerson Electric Co. (EMR); TJX Companies, Inc. (TJX) and the Focus List deletions are D.R. Horton Inc. (DHI); Activision Blizzard Inc (ATVI); Trane Technologies plc (TT); Lazard Ltd. (LAZ).

The SPDR Gold Shares (GLD) popped 1.1% on Thursday -- back near the highs from mid-July in the $171 area. That represents 50% of the decline since early June. GLD is slightly above its 200-day average and right at the underside of its 50-day average. But moving averages in a sloppy environment (like the one that GLD has been in for almost a year) really don't mean a whole lot.

The dollar spiked early in the pandemic, as global investors flocked to the security of assets denominated in greenbacks. Indeed, the dollar last year surpassed cycle highs set initially in 2001-2002 and then again in late 2016. But since peaking in April 2020, the greenback has drifted lower. Currently, on a real trade-weighted basis, the dollar is 8% above the average valuation over the past 20 years, but down from a 17% overvaluation at that April peak. The fully valued U.S. currency reflects several factors, but primarily the relative strength of the U.S. economy and global investor confidence in both the U.S. Federal Reserve and Department of Treasury as the world economy recovers from COVID-19. We anticipate a trading range around current levels for the greenback for the balance this year. That's because we think U.S. GDP will start to cool from the white-hot rates of 1H21. While Congress has been aggressive with fiscal stimulus, at some point, traders may become wary of the high level of U.S. debt relative to GDP. Lastly, the lofty current valuation of the greenback implies that other currencies -- and even gold or other commodities -- are possibly undervalued, and traders can be expected to bid up those values over time.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

With earnings season underway, the volume of insider transactions has slowed markedly. Overall insider sentiment remains frustratingly non-committal, with a bias toward caution yet certain trends slowly improving.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

Stocks fell for a second day on Tuesday morning, led by sharp declines in the Financial and Energy sectors. IBM shares rose more than 4% following stronger-than-expected first-quarter sales and earnings, helped by strength in the company's cloud computing business. On the negative side, Abbott Laboratories fell sharply after reporting slightly lower than expected sales, including a sequential decline in revenue from coronavirus test kits. The Dow fell 0.9%, the S&P 0.9%, and the Nasdaq 1.1%. Crude oil traded near $62 per barrel, while gold rose $9 to $1780 per ounce.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.