It’s impossible to keep up with everything going on in financial markets and the economy these days. That’s where The 5, a new feature for Money & Markets Daily, comes in…
Let’s start your week off right by exploring the most significant trends and opportunities you need to know now.
The Fed Keeps Truckin’ Along
If you were in the “interest rate cuts are coming early in 2024” crowd, you’re sorely disappointed.
Last week, the Federal Reserve continued its “higher for longer” stance by keeping its benchmark fed funds rate level — even though recent Consumer Price Index data showed inflation was cooling a bit.
For reference, Adam and Matt have stated on the record to expect “higher for longer” interest rates (and the Fed agrees … sort of).
Rather than focus on Fed Chair Jerome Powell’s riveting press conference after last week’s Federal Open Market Committee meeting, Wall Street looked at one thing: the “dot-plot.”
This graph shows how the 19 members of the committee see Fed fund rates playing out over the long term:
According to the latest projections, which look more like a game of “Connect Four,” seven committee members projected just one rate cut happening in 2024. The other four don’t see any occurring at all.
The market was mixed after the release of the “dot plot” on Wednesday, with the S&P 500 (+0.9%) and the Nasdaq (+1.5%) closing up after the announcement. The Dow closed 0.1% lower.
Investors slowed their roll to close out the week, with broader indexes closing slightly lower on Friday afternoon.
The takeaway?
In a normal world, last week’s Fed announcement would have held the market flat, considering how much Wall Street bet on multiple rate cuts by the end of the year.
But this world is far from the normal…
Investors are looking for any silver lining to keep pushing the market higher.
And hopes for lower rates soon are enough … for the time being.
The Era of the Stock Split
There are two types of stock splits: a forward stock split and a reverse stock split.
A forward stock split takes one share and breaks it into many equal parts … with the goal of making the stock more affordable.
A reverse stock split takes one share and increases its value … with the intent of meeting listing standards for U.S. stock exchanges.
Last week, Broadcom Inc. (Nasdaq: AVGO) announced a 10-for-1 forward stock split… essentially turning one share into 10.
Before the split, the stock was priced at around $1,500 per share, so shares would be valued at $150.
As a result of the announcement (and a strong quarterly report), shares of AVGO jumped nearly 14% on Thursday:
Nine large-cap stock splits were announced in all of 2023, and we’ve already surpassed that number in 2024 (AVGO was the tenth)!
Individual stock splits have little bearing on the overall performance of the broader market. However, they do suggest more confidence for forward-splitting companies in the months and years ahead.
Earnings to Watch: Kroger Co. (NYSE: KR)
Consumer sentiment in the U.S. fell to an unexpected seven-month low in early June, according to the latest report from the University of Michigan.
Analysts expected the index to increase from 69.1 to 72, but it reversed course and dropped to 65.6.
It’s not cause for immediate concern, but it shows that American consumers are tightening their purse strings.
If you’re looking for more insights into the state of the economy, watch out for Kroger Co.’s (NYSE: KR) earnings, which are scheduled to drop on Thursday before the market opens.
If anyone has a finger on the pulse of the everyday economy, it’s a massive grocery chain like Kroger. And weak earnings could point to trouble ahead.
KR stock currently rates “Strong Bullish” in our Green Zone Power Ratings system. We’ll see if that changes after Thursday…
KR’s Green Zone Power Ratings in June 2024.
Get Paid for Getting It Wrong
There’s an old joke that weather forecasting is the only job where you can get paid a good salary and still be wrong most of the time.
We can add corporate CEO to that list.
Tesla Inc. (Nasdaq: TSLA) shareholders approved a massive $56 billion pay package for CEO Elon Musk (despite a Delaware court ruling the package was unconstitutional).
This comes amid issues with the accelerator pedal forcing a short delivery shutdown of Tesla’s new Cybertruck, a scaleback in the company’s workforce, and Tesla’s slipping grip on the global EV market share (as Matt pointed out in his recent examination of TSLA).
See, you can get stuff wrong all the time and still make a ton of money doing it!
AI’s Biggest Need
It’s impossible to escape AI talk in 2024.
But that’s not necessarily a bad thing considering the tear some of these stocks have gone on.
If you’re looking for recommendations beyond NVDA and MSFT, Adam has you covered.
There’s one thing AI needs a ton of to continue innovating at an impressive clip. And Adam’s recommendation within this space is already up more than 40% in just over a month.
Click here to see how you can access his analysis now.
— Money & Markets Team