My top 10 things to watch Wednesday, Feb. 22
1. Bonds are in charge. Yields tick lower and stocks bounced after St. Louis Fed President James Bullard told CNBC on Wednesday he’s confident that the central bank can reach its inflation goals this year. The Dow, the S&P 500 and the Nasdaq are set to open modestly higher, one day after their worst session of the new year. Check out this one chart that shows why January’s stock rally hit a wall in February.
2. Here’s my six-item checklist for what must happen before I will be ready to declare an end to the market sell-off. Until more of these boxes get checked, respect the sellers. We may not get all six. But Bullard on Wednesday almost makes you feel like you want to own stocks.
3. Palo Alto Networks (PANW) shares jump nearly 10% early Wednesday. Our newest Club holding, which we have been buying into the quarter, is not stressing non-GAAP profitability. This next-generation cybersecurity giant is stressing generally accepted accounting principles (GAAP) profitability. That’s the REAL pivot. Raises full-year outlook. Consolidation is coming.
4. Intel (INTC) cuts quarterly dividend by 65% to 12.50 cents per share. The move comes on the heels of a major cost-cutting plan announced weeks ago. Intel has lost a lot of market share in recent years to Club holding Advanced Micro Devices (AMD).
5. Coinbase (COIN) reports a quarter that’s a big loss but they turn it into a gain by making it sound like they have rationalized their table of employment. They, again, stick a finger in the eye of the SEC questioning its legitimacy to regulate and suggest that Congress will do so. This was an unreal, arrogant call in light of Sam Bankman-Fried’s FTX collapse.
6. ZipRecruiter (ZIP) shares sink 18% early Wednesday. Microcosm of what we are facing. “January came in quite a bit below what we would have normally expected,” the CFO says. It’s a profitable but 43x earnings, the opposite of what you should be buying here. Low multiple stocks that are reasonably valued to the market and peers are best.
7. Natural gas dips under $2. How is this even possible? The lack of a real winter. Nat gas all the way up near $10 back in August. Club holding Coterra Engery (CTRA), which is 50/50 oil and nat gas, has held up much better than the commodities. The exploration and production (E&P) company reports after the closing bell Wednesday. So does E&P peer and fellow Club holding Pioneer Natural Resources (PXD).
8. We trimmed our CTRA and PXD positions and downgraded each to 2 rating after Devon Energy‘s (DVN) terrible quarter. We did not trim Devon and kept at 1-rating for now, given it already moved significantly lower. Raymond James cuts price target on DVN to $67 per share from $80. A bit of a catch-up move to last week’s plunge.
9. Toll Brothers (TOL) shows the Fed’s work is not done. But is it because there aren’t enough homes? What do we not have enough of: Homes and workers and food. The Fed can’t seem to augment any of them. Separately, mortgage applications decreased 13% from a week ago.
10. Multiple price target cuts for Home Depot (HD) on Wall Street, one day after missing the quarter on revenue and offering muted outlook. Housing really depreciating. Though importantly, the Fed does not control mortgage rates.
(See here for a full list of the stocks in Jim Cramer’s Charitable Trust.)
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