The midday Monday market mood is upbeat. Small-caps again are winning the day with the Russell 2000 up 1.5%. Techs are also having a good day. Other indices are in green as well. Goldman Sachs crushed earnings expectations and that is lifting bank stocks, especially those with investment banking divisions. Fed Chairman Powell is speaking at lunchtime today. His remarks will be televised. Economists will be tuning in as these comments come after the news on inflation last week that showed consumer prices tracking lower and on the way to the Fed's target rate.

The midday Monday market mood is upbeat. Small-caps again are winning the day with the Russell 2000 up 1.5%. Techs are also having a good day. Other indices are in green as well. Goldman Sachs crushed earnings expectations and that is lifting bank stocks, especially those with investment banking divisions. Fed Chairman Powell is speaking at lunchtime today. His remarks will be televised. Economists will be tuning in as these comments come after the news on inflation last week that showed consumer prices tracking lower and on the way to the Fed's target rate.

In this edition, diving into mining in China; initiating coverage of Amer Sports; watching the waves in the cruise line industry; and Ericsson, Estee Lauder Companies, and GE HealthCare.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Jim typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.

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.

In this edition, diving into mining in China; initiating coverage of Amer Sports; watching the waves in the cruise line industry; and Ericsson, Estee Lauder Companies, and GE HealthCare.

Thursday was one of the strangest market days that we can remember. The S&P 500 fell 0.9%, the Nasdaq gave back almost 2%, the Nasdaq 100 declined 2.2%, and the S&P 100 dropped 1.6%. Meanwhile, the Russell 2000 (IWM) surged 3.6%, the S&P MidCap 400 popped 2.5%, and the Invesco S&P 500 equal weight (RSP) gained 1.2%. NYSE breadth was quite strong at +2,200, NYSE advancing issues/total issues hit 78%, and NYSE advancing volume/total volume popped to 84%. Yes, you read that correctly. Talk about a day of rotation! Real Estate (XLRE) was up 2.7% and Utilities surged 1.8%, both helped by falling interest rates. Materials rose 1.4%, Industrials rose 1.3%, Energy gained 1%, Financials rose another 0.8%, and Healthcare was up 0.7%. Information Technology dropped 2.5%, with semiconductors down 3%-4%. As mentioned, momentum was scorching on Wednesday, with the S&P 500's 14-day Relative Strength Index (RSI) hitting 82 on Wednesday, the most overbought reading since December 19, 2023. That was followed by a nasty one-day wonder to the downside and some chop for a couple of weeks before the index took off again. The 14-week RSI reached 77 this week, the highest since 79 was hit in late March -- just before a slide of several hundred points in the index that, of course, was followed by all-time highs. The 14-day RSI for the Nasdaq 100 (QQQ) hit 80 Wednesday after reaching 82 in mid-June. The 14-week RSI is in the mid-70s. Generally, we see some indigestion when we cycle this far into overbought territory. Then there is often another run higher. (Mark Arbeter, CMT)

The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.

After opening slightly higher on positive inflation news, the Nasdaq is down 1%, while the small-cap Russell 2000 is up 3%, a big move. The closely-watched Consumer Price Index outright declined during the month of June and is now running at an annual 3.0% pace, down 30 basis points from the rate through June. This is the lowest CPI rate since March 2021. On a core basis, excluding the impact of volatile food and energy prices, inflation also moderated month-over-month and is clocking in at 3.3% rate, down 10 basis points month-over-month.

Solid Second Quarter Amid Signs of Slowing Activity History will record a good start to 2024, with the S&P 500 up 15% in the first six months. However, it was not all sunshine and roses. After generally rising across the first quarter, stocks fell in April. Heading into May, the gain in the S&P 500 had been cut to 7%. From May 1 to mid-June, the Nasdaq soared 17%; and the S&P 500 rose 13%. If you annualize those returns, the Nasdaq was on track for a 110% annual gain and the S&P 500 for a 70% annual gain. After consolidating those gains in the final two weeks of June, the stock market took off again to open July - normally a good market month. Plainly, the mood has shifted to anticipating the Fed beginning to cut rates this year as inflation continues to decline. Environment: Second-Quarter 2024 The U.S. stock market extended its first-quarter 2024 momentum into the second quarter, but gains were muted by an April stumble and some narrowing in sector breadth compared with 1Q24. After advancing 10.6% on a total-return basis (with dividends) in 1Q24, the S&P 500 posted 2Q24 total return of 4.1%, while rising from 5,254 at the end of March 2024 to 5,460 at the end of June. The quarter started with a 'cruel' April, in which the S&P 500 slid 3%. Interest rates spiked in the fourth month, as March data suggested that the fight against inflation had bogged down. The index posted identical 3.5% gains in May and June, as improving inflation trends rekindled rate-cut optimism. The Fed held rates steady at its June 2024 meeting, as it has done at every FOMC meeting since July 2023. Following the May FOMC meeting, the Fed noted 'a lack of further progress' toward the Committee's 2% inflation objective. The language in the June FOMC report, by contrast, noted 'modest further progress' toward the Committee's target. The Fed started to hike rates more than two years ago based on the perception that pricing pressures were mainly tied to the supply-chain crisis and could be quickly subdued. Stubbornly high costs for shelter and service components, including vehicle insurance, have underscored that inflation is about far more than the supply chain. The Fed's preferred inflation gauge, the core PCE price index, rose 0.1% in May and was up 2.6% year over year. That was the lowest annual rate of change in the core PCE price index since March 2021, which was also the first time in the current economic cycle that inflation topped the Fed's 2% target. The core PCE data confirmed inflation inputs from May CPI and PPI reported earlier in June. May core CPI was up 0.2% month over month, the lowest since June 2023. Overall improvement in inflation is allowing market rates of interest to move down from spring peaks, even though they remain above optimistically low levels at the beginning of 2024. The 10-year Treasury yield was 4.29% at the end of June, down from 4.41% at the end of May and peak levels of 4.63% as of the end of April. The two-year Treasury yield was 4.70% as of end of June, down 4.82% at the end of May and the peak level of 4.96% as of end of April. After showing signs of moderation for much of 2023, the jobs economy sustained year-end 2023 strength across the first half of 2024. The U.S. economy delivered 206,000 new jobs in June, above the consensus of 190,000. June's increase in payrolls and revisions lower to results from May and April took the three-month average to 177,000, below the 12-month average of 220,000. The unemployment rate rose to 4.1% for June, and is now at the level the Fed would prefer to see before beginning its rate-cutting campaign. Average hourly earnings increased 10 cents month to month and are 3.9% higher year over year (compared to 4.1% in May). Annual wage growth continues to run above inflation, but the premium has narrowed. The industrial economy continues to send mixed signals. Industrial Production for May rose 0.9% month-over-month, much better than the 0.3% consensus forecast and up from no growth in April. May capacity utilization was still below the long-run average, but was up half a point from April. Supply-chain executives in the manufacturing sector expressed cautious optimism in spring 2024, but it did not last. For June 2024, the ISM manufacturing PMI index came in at 48.5%, down from 48.7% in May and 50.3% in April. ISM's manufacturing PMI has been below 50% for 19 of the past 20 months. After several years of adding workers as fast as they could, manufacturers are now engaging in targeted layoffs. Order growth has slowed in areas including metal fabrication and transportation equipment, while rising in areas such as computers & electronic products. The ISM services PMI unexpectedly dipped to 48.8% for June from 53.8% in May. While this was just the third time the services sector contracted in the past 49 month, it was also the second sub-50 reading in just the past three months. That is of concern, given that the services economy is several time the size of the manufacturing economy. Signals from the consumer economy also remain mixed. Retail sales in May edged up just 0.1% from April, when sales declined 0.2%. On a year-over-year basis, retail sales in May 2024 were up 2.3%; that is down from consistent mid- to high-single-digit annual growth across 2023. Straddling the commercial and consumer economies is housing. Both existing home sales and new home sales as of spring 2024 were running at about 62% of peak pandemic-infused levels from 2020-2022. Housing likely is frozen in place until mortgage rates begin coming down. First-quarter GDP grew at a disappointing 1.4% annual rate. Personal consumption expenditures (PCE) for 1Q24 increased 1.5% while non-residential fixed investment (a proxy for corporate capital spending) rose 4.4%. Together, these two components make up over 80% of GDP. S&P 500 earnings for 1Q24 (reported from mid-April to mid-May) rose in high-single-digit year-over-year percentages, marking a third consecutive quarter of annual EPS growth. Around 80% of companies exceeded consensus expectations for 1Q24 EPS versus 70%-75% on average. The magnitude of the beat was at the high end of the 5%-8% historical range. As of the end of 1Q24, the S&P 500 was a few ticks ahead of the Nasdaq Composite. That changed in 2Q24, as Nasdaq raced ahead for an 18.6% total return as of mid-year, versus 15.3% for the S&P 500. Information Technology was the fourth-place sector for 1Q24 and lagged the S&P 500. That too changed in the second quarter. Information Technology led the market with a 28% gain at mid-year, just ahead of 27% for Communication Services. While only those two sectors were ahead of the S&P 500 at mid-year 2024, multiple sectors - including Energy, Financial, Utilities, Consumer Staples, and Healthcare - were beating or just below the S&P 500's average annual appreciation, which has been right around 10% since 1980. The Consumer Discretionary sector, one of the top-three performers in 2023, was ninth among 11 sectors in the 2024 first half. The reality of weak consumer goods spending was evident in the 1Q24 GDP report as well as in April and May retail spending. After a worrisome level of AI-driven sector concentration in 2023, the market experienced much-better breadth in 1Q24. A refocus on growth sectors and AI led to a narrowing in the advance in 2Q24. But breadth at mid-year 2024 was still better than it was at mid-year 2023. Conclusion In broad terms, the nearly two-year rally in stocks is a good thing. Investors are in the green; with fewer losers, they do not need to sell underwater positions and thus weaken rallies. Also in broad terms, the nearly two-year rally in stocks is too narrow. The risk of investor concentration has been amplified by AI mania. In 2023, three sectors - Communication Services, Technology, and Consumer Discretionary - accounted for most of the year to date advance. This year, we are down to two sectors - Communication Services and Technology. In addition to sector concentration, this rallying market is characterized by individual stock concentration. As AI mania gripped the stock market, the 'Magnificent Seven' of assumed AI beneficiaries dominated the rally. These seven stocks are Nvidia, Microsoft, Alphabet, Meta Platforms, Amazon, Apple, and Tesla. As of May 2024, these stocks represented 29% of total S&P 500 market capitalization. When a single sector or a single cluster of stocks is dominant, it usually does not end well. Past examples include Energy, which is now one-quarter its peak market weight; and Apple, which was unstoppable in the early days of iPhones but has stumbled multiple times since. The Street is divided as to how long the seven can remain magnificent. Given that the age of generative AI has only just begun, Argus believes these names and other perceived AI winners could lead the market over the next several years.

The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.

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.

Will he give any hints? Fed Chairman Powell is back on Capitol Hill again today, this time testifying on the U.S. economy to the House side. Powell always sticks to message - the Fed wants to be extra, super, highly confident that inflation will be sustainable at the 2% level before it considers lowering interest rates. Still, Wall Street and economists around the world listen for clues on when that day might come. Tomorrow at 8:30am, we get fresh inflation data in June CPI which will also be highly analyzed. The last print was 3.3% so we're not quite there yet at the level that Powell is looking for. The Jobs numbers out last week helped make the case for a rate cut. Now analysts are looking for further evidence. Meanwhile, markets are in a mid-summer mood today - flat.

The Vickers Top Insider Picks is a daily report that utilizes a proprietary algorithm to identify 25 companies with compelling insider purchase histories based on transactions over the past three months.