Monday Market Madness – Weak Bounce Edition

15
1470

4,160.  

SPX May 8 2023

A lot of you have forgotten that that is the Weak Bounce line on the S&P 500 and that’s what we’re testing this week – after last week’s very sudden, and misguided reaction to more jobs.  This week, we’ll see if there’s also more inflation that the market can misinterpret as well.  

In the bigger picture, it’s a lot more clear that this is all only, so far, a weak bounce off the 200-day moving average, which is only just now recovering to our 4,000 base-line (and weakly at that).  In other words – Don’t Get Excited!  

SPX2 May 8 2023

Earnings season has not been the catastrophe it was shaping up to be with the banking crisis.  That’s because the banks that would have reported hundreds of Billions of Dollars worth of losses have been absorbed and those losses have been bailed out already – so no losses to report.

With bank losses swept under the rug and 85% of the S&P 500 having now reported, 79% have beaten Earnings expectations (which were very low) with 75% beating Revenue expectations – also very low.  Profits are down 2.2% overall but were forecast to be down close to 5% so again, we are crushing the low expectations.  

Only 79 companies out of 425 that have reported have given guidance at all and 56% of that guidance was lower than expected but the market has recovered once again to test our Weak Bounce line at 4,160 so, hopefully, 4th time (this year) is a charm!  

Berkshire Hathaway is a nice proxy for the S&P 500 and the reported nice earnings on Saturday of $8.1Bn for Q1, up 12.6% from last year and that was entirely driven by a $911M profit increase in their Insurance Business (Geico, etc.) which benefited from higher rates on their reserves – which was our entire premise for investing in insurance companies.  

BRK-A May 8 2023

Shel-Bot has been getting very good at breaking down reports so here’s his take on Berkshire’s quarterly report:

⊗The Good:

Again, nothing to actually get too excited about.  As Buffett notes, these gains are ethereal at best…

What I want to see in Berkshire’s annual report is an underlying strength in the performance of their subsidiaries that is augmented by the performance of their holdings – that was not the case at all:    

    • Insurance: GEICO, General Re, Berkshire Hathaway Reinsurance Group, Berkshire Hathaway Primary Group, National Indemnity Company, etc.
    • Railroads: BNSF Railway Company
    • Utilities: Berkshire Hathaway Energy Company, which includes MidAmerican Energy Company, NV Energy, PacifiCorp, Northern Powergrid, etc.
    • Manufacturing: Acme Brick Company, Benjamin Moore & Co., Clayton Homes, Duracell, Forest River, International Metalworking Companies (IMC), Johns Manville, Lubrizol Corporation, Marmon Holdings Inc., Precision Castparts Corp., etc.
    • Consumer Products: Brooks Sports, Fruit of the Loom, Garanimals, H.H. Brown Shoe Group, Justin Brands, See’s Candies, etc.
    • Service: Berkshire Hathaway HomeServices Cancun Properties, Business Wire, Charter Brokerage LLC, FlightSafety International Inc., NetJets Inc., TTI Inc., etc.
    • Retailing: Borsheim’s Fine Jewelry, Helzberg Diamonds, Jordan’s Furniture Inc., Nebraska Furniture Mart Inc., RC Willey Home Furnishings Inc., Star Furniture Company Inc., etc.

If Buffett’s companies are underperforming – how do you think the guy down the block is doing?  

The economic data is fairly light this week but CPI on Wednesday morning is critical – as is the 10-year note auction which follows it.  PPI on Thursday and Consumer Sentiment Friday and we’re at the tail end of earnings season with the S&P 500 pretty much done this week:

Calendar May 8 2023

The most anticipated earnings releases scheduled for the week are PayPal #PYPL, Palantir #PLTR, Airbnb #ABNB, Disney #DIS, Devon Energy #DVN, Tyson Foods #TSN, BioNTech #BNTX, Roblox #RBLX, Rivian Automotive #RIVN, and Occidental Petroleum #OXY.

I’ve been trying to teach Shel-Bot how to analyze the markets for me so, this week, I’ve asked him what 5 companies are most likely to miss this week.

⊗ Here is what I found:

I hope this list helps you identify some of the companies that are most likely to miss their earnings and why that are scheduled to report for the week of May 8, 2023.😊

We’re still on the sidelines and waiting to see how things turn out but, according to our Watch List, there are still plenty of bargains to be had and the only think that would rush us is a clear break over 4,160 that holds for the week along with 1,800 being re-taken on the Russell.  

The world is changing fast – let’s try to enjoy the ride…

Doonsb AI

 

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