Research Reports

U.S. stocks fell on the CPI report that showed hotter-than-expected inflation data. Headline CPI rose 0.3% in January, up from 0.2% in December and above the consensus estimate of a 0.2% increase. Core CPI rose 0.4%, up from last month's 0.3% increase. These latest readings bring the annual rate of headline CPI to 3.1% and core CPI to 3.4%, down from 3.4% and 3.9%, respectively. The S&P 500 fell 1.1%, the Dow 1.1% and the Nasdaq lost 1.3%. Crude oil traded near $78 per barrel and gold fell $26 to $2007 per ounce.

The transportation and supply-chain industry moves goods from producers to consumers. In the early days of COVID-19, consumer demand plummeted. But as the world shifted to remote working, freight demand surged. Consumers bought office and exercise equipment, making many of their purchases online and driving freight levels. After the pandemic began to recede, many workers stayed home, but shifted spending patterns towards experiences, leading to a downturn in shipping demand. While the supply chain has started to normalize, it remains out of balance, with periods of rising shipping demand likely to make sourcing goods and inventories at a timely rate challenging. The transportation and supply-chain industry accounts for almost 2% of the S&P 1500 market capitalization and just over 2% of the revenue generated by companies in the index. The largest 20 companies by market capitalization collectively generated revenues of almost $400 billion in 2022. These companies employ over 8 million workers, with over 26% of them working in truck transportation. According to the U.S. Department of Transportation's Bureau of Transportation Statistics, the U.S. transportation system moved an average daily 55.2 million tons of freight valued at more than $54 billion. Excluding materials moved by pipeline, estimated annual freight moved will be approximately 16.4 billion tons. The majority is moved by truck, which handles about 75% of the total fright load. Water and rail freight each move about 6%, air freight moves less than 1%, and the remaining amount is moved by multiple modes.

Returns can get a bit dicey for the stock market from February into mid-March, especially in a presidential election year. Yet Monday saw a massive reversal in relative strength, one that could be described as "Revenge of the Small Caps." That also can be said about the past three trading days. The Russell 2000 (IWM) rose 1.8% on Monday and has popped 5% in the past three days. The iShares Micro-Cap ETF (EWC) gained 2.8% yesterday and has surged over 6% in the past three days. The IWM is quickly approaching a key technical level at 205, which was the recent high in late December as well as the key breakdown level from January 2022.

Stock indices are at all-time highs, while the overall tone in current and recent sell/buy ratios from Vickers Stock Research remains one of clear caution. Indeed, at 5.47, Vickers' Total One-Week Sell/Buy ratio, which measures activity across the NYSE, Nasdaq, and American Stock Exchange, is at its highest level since July 2023, shortly before the market experienced a 10% pullback in stock prices that extended until late October 2023. With readings above 2.50 signifying bearish sentiment, the Total One-Week ratio has now been in bearish territory since late November, fueling a rise in the Total Eight-Week Sell/Buy ratio to its current reading of 4.51. These cautious readings align with other developing concerns, such as overbought momentum, overbought breadth, and market sentiment that is exceedingly hot. Stocks have performed nicely so far in 2024, but insiders, with a recent uptick in pre-planned sales and decrease in buying, still seem to be building a defensive case.

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.

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.

O’Reilly is an aftermarket automotive parts retailer in the United States and Mexico with nearly $16 billion in annual sales. The company operates over 6,000 domestic stores and serves both the do-it-yourself (about 55% of sales) and professional (45% of sales) end markets. Despite operating amid a highly fragmented industry, O’Reilly differentiates itself by providing quality service to its customers throughout the entirety of the vehicle diagnosis and purchasing process. Furthermore, the firm boasts an impressive hub-and-spoke distribution network designed to provide its localized store base with ample aftermarket product availability across various vehicle makes and models.

Maplebear, which does business as Instacart, is an online grocery pickup and delivery service provider currently in the United States and Canada. Instacart partners with local and national grocers who provide their selection of food and other goods to customers through Instacart’s mobile app or website. After a customer places an order, an independent personal shopper employed by Instacart will pick the order and either prepare it for pickup or deliver it to the customer’s chosen location. Instacart’s revenue model consists of transaction revenue in the form of retailer and customer fees, as well as advertising revenue from brand advertising on Instacart platforms.

Stocks edged up on Monday ahead of a collection of economic data that will be released this week, including inflation, retail sales and housing data. The Dow rose 0.5%, the S&P 500 was up 0.4%, and the Nasdaq gained 0.5%. Crude oil is trading little changed near $77 per barrel. Gold fell $10 to $2028 per ounce.

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 benchmark U.S. 10-year Treasury bond yield is near 4.1%. The yield tipped over the key 5% threshold in mid-October, its highest rate in nearly 16 years, before retreating to current levels. The current yield is down almost 20% from the October peak. The retreat is now the interesting part. The Federal Reserve has all but said that it is done raising interest rates for this tightening cycle. Economists and Wall Street are eagerly waiting hints that the Fed's "pivot" might translate into the fed funds rate actually starting to inch down. But Chairman Powell is maintaining a cautious tone. Argus' Fed watcher, Kevin Heal, has remained equally steady with his projection that the first rate cut is not likely until the second half of this year. The U.K. is seeing a similar trend, with its 10-year benchmark bond yield at 3.9%. Sentiment there is also growing that higher rates might be elevated for longer than expected, as the U.K. has experienced rampant inflation over the past few years. Elsewhere, political uncertainty in South Africa and Brazil are keeping those sovereign debt interest rates near 10%. Russian debt is above 12%, up 300 basis points from a year ago, as the conflict with Ukraine drags on. At the other extreme among the biggest nations, yields for Japanese debt remain low at 0.7%. From a portfolio perspective, we would avoid over-weighting foreign-government fixed-income securities at this time, given their volatile yields, sovereign risks, and repatriation issues.

The S&P 500 (SPX) has closed above 5,000. Now what? While forecasting is never easy, it is particularly difficult at this juncture as the major indices continue to ignore overbought momentum and breadth signals, bearish momentum and breadth divergences, and market sentiment that is scorchingly hot. But we will get that pullback, as we always do. And that brings up another question. Will the decline be shallow (a few percentage points) and then morph into more of the crawl-higher lockout rally? Or will the retracement be in the 7%-10% area, shake the confidence of some, and bring bears out of hiding?

Monday Tee Up: Is Inflation Still Tracking Lower?

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.

Canopy Growth, headquartered in Smiths Falls, Canada, cultivates and sells medicinal and recreational cannabis, and hemp, through a portfolio of brands that include Doja, 7ACRES, Tweed, and Deep Space. Its non-THC products include sports drink BioSteel, skincare products under This Works, Martha Stewart CBD, and Storz & Bickel vaporizers. Canopy growth is attempting to merge its U.S. assets into a separately operated holding company, Canopy USA, which will not be consolidated into the Canadian company's financials.