In my last Earnings Edge piece, I mentioned it was hard to be bullish.
That was two weeks ago, after the market had already dipped and many traders were looking at opportunities to buy.
Staying bearish proved to be solid advice since then. The broad indexes continued to dip that week, and last week’s bounce was small.
After the latest rally, I’m back to where I was two weeks ago: It’s still hard to be bullish right now.
And the charts on our Earnings Edge stocks today are not helping that sentiment change.
Let me explain…
Earnings Edge Stock No. 1: MSC Industrial Direct Co Inc. (NYSE: MSM)
Earnings Announcement Date: Wednesday, before the open.
Expectations: Earnings at $1.72 per share. Revenue at $958 million.
Average Analyst Rating: Outperform.
MSC Industrial is a maintenance industrial company. Its earnings will show the effect of rising interest rates in the industrial sector.
Higher rates are going to cut down on many of the projects that would have moved forward before the Federal Reserve’s war with inflation. High inflation doesn’t help either, so it’s a double-edged sword at the heart of our economy.
The Fed is trying to take inflation out without doing damage, but that’s a thin line to walk.
MSM is already down 25% since May 2021, but its latest price move has me even more worried.
MSM’s Latest Tank Job
MSM shares recently broke below a multiyear support level.
This points to more weakness ahead. Even if it manages to rally with the rest of the market on its earnings report — I’m not buying it.
Again, it’s hard to be bullish right now.
And when industrial stocks that have held up better than most begin to break down, it doesn’t give me any urgent need to buy.
Stock No. 2: NovaGold Resources Inc. (NYSE: NG)
Earnings Announcement Date: Wednesday, after the close.
Expectations: Earnings at a loss of $0.04 per share.
Average Analyst Rating: Hold.
NovaGold is an exploration gold miner with rights to what will likely be the largest gold mine in production when it comes online.
That’s why, despite no revenues, this stock tends to trade with gold prices and is an indicator for the risk-on/risk-off environment in the market.
Gold prices peaked in March and April and have sunk 10% from those highs.
That’s something to note because the S&P 500 had a top in March as well. The major index has fallen almost 20% from that top.
Gold is not acting as a safe-haven asset right now, and NovaGold’s shares reflect that.
NG: No Place to Hide
The stock has been in a downtrend for a year now as investors have lost patience with gold.
This is a volatile market, the type that is the perfect opportunity for investors to become more risk-off and look for safe-haven assets. We just haven’t seen that activity hit the precious metals sector yet.
I don’t think we have bottomed until investors flee to stocks like this.
Gold miners, producers and gold in general is a place to store value. That’s where investors look when things get outright ugly.
It’s been nasty out there so far, but it can still get a lot worse.