If you’ve never heard the story about Willie Sutton then you’re in for a quick little treat…
Someone once asked Slick Willie Sutton, the infamous bank robber, why he robbed banks. The question might have uncovered a tale of injustice and lifelong revenge. Maybe a banker foreclosed on his house or charged him an outrageous overdraft fee.
But that wasn’t the case….
“I rob banks because that’s where the money is,” Willie answered.
His answer was so simple it was brilliant… And makes you think “what else do these banks know that we don’t…? We’re going to do a quick dive into this topic in a minute, but first we need to go over some numbers on the week.
U.S. Equities Finished a Strong Week with More Gains…
U.S. equities finished a strong week with more gains, as solid bank earnings reports added to earlier news about easing inflation, boosting investor confidence.
For the week, the Dow was up 2%, the S&P 500 gained 2.7%, and the Nasdaq soared 4.8%.
Bitcoin headed into the weekend up around 23% after finishing its best week since March.
A report showing a jump in consumer sentiment also helped raise optimism heading into the long holiday weekend. .
According to the CPI Report released on Thursday (1/12/23) the annual inflation rate in the US slowed for a sixth straight month to 6.5% in December of 2022, the lowest since October of 2021, in line with market forecasts.
It follows a 7.1% reading in November.
Energy cost increased 7.3%, well below 13.1% in November, as gasoline cost dropped 1.5%, following a 10.1% surge in November.
Also, fuel oil cost slowed (41.5% vs 65.7%) while electricity prices rose slightly faster (14.3% vs 13.7%).
A slowdown was also seen in food prices (10.4% vs 10.6%) while cost of used cars and trucks continued to decline (-8.8% vs -3.3%). On the other hand, the cost of shelter increased faster (7.5% vs 7.1%).
Compared to the previous month, the CPI edged 0.1% lower, the first decline since May of 2020, and beating forecasts of a flat reading.
Inflation seems to have peaked at 9.1% in June of 2022 but it still remains more than three times above the Fed’s 2% target
Investors looking for a preview of what 2023 will bring for the market and economy should pay close attention to bank earnings, which started on Friday 1/13/23 and continues this upcoming week.
Behemoths JPMorgan Chase (JPM) and Bank of America (BAC) were among the first of the big banks to post their financial results for the fourth quarter of 2022 as well as give their economic assessments for this year.
JPMorgan and Bank of America’s earnings both topped analysts’ expectations.
Compared with other sectors, bank results provide the most comprehensive view of the economy. Home, auto, and business loans all go through banks while the largest ones also give a window into capital markets activity ranging from deal making to trading.
Wells Fargo (WFC)’s fourth-quarter earnings beat estimates by 7 cents. Citigroup‘s (C) results came in mostly in line with analysts’ expectations as profits fell, due in part to higher credit costs.
Morgan Stanley (MS) and Goldman Sachs (GS) will report on Tuesday 1/17/23… As a reminder, markets are closed Monday 1/16/23 in observance of Martin Luther King Jr. Day.
The Future of Banking
Banks have long known that if they can capture the attention of customers when they are young, they are likely to get hold of them for life.
For this reason, they have always been quick to jump on new and emerging trends, and today’s hot tech potato – the metaverse – is certainly no exception.
Generation Z consumers are fully digital-native – online is the default option for them when they go looking for the products and services they need.
The metaverse – persistent, immersive digital environments that potentially offer everything we need to live our lives digitally, under one roof – provides new ways for businesses to connect with customers.
Banks, as ever, have been keen to capitalize on it.
One of the most obvious uses of the metaverse, as far as retail banks are concerned, is to create “virtual branches” where they can sell banking products to a new breed of digitally-native gen-z consumers, or provide customer service to their existing customers.
Emerging metaverse platforms like The Sandbox and Decentraland attract hundreds of thousands of visitors each month, while established gaming platforms with metaverse-like functionality, such as Roblox or Fortnite, can attract millions. Their audiences are digital natives and are keen to do business with companies that share their understanding and enthusiasm for virtual worlds and gaming-style environments.
Among those who have been first to set up virtual storefronts is HSBC, which purchased land in The Sandbox earlier this year, which it will use to engage with online sports fans and e-sports enthusiasts. Its CMO for the Asia Pacific region, Suresh Balaji said, “At HSBC, we see great potential to create new experiences through emerging platforms, opening up a world of opportunity for our current and future customers and the communities we serve.” Thailand’s Siam Commercial Bank also has a virtual branch on The Sandbox platform.
Our research has brought us to a little-known Augmented Reality (AR) company that could be very well positioned for significant growth in 2023 as the emerging $5 trillion metaverse economy takes shape.
You’ll receive a full report on this company as soon as our research report is complete.
—Stay tuned for our Augmented Reality (AR) Report.
Defense Stocks Plunge as Goldman Sachs Reconsiders
With a war currently on in Ukraine, and the United States pumping cash and resources into it like crazy, you’d think defense stocks like Lockheed Martin (NYSE:LMT), Raytheon (NYSE:RTX), and Northrop Grumman (NYSE:NOC) would be on top of the world.
That’s not the case, as all three were down in Friday’s trading.
What happened to all of these companies to send them down in wartime, no less? A downgrade from Goldman Sachs (NYSE:GS) hit each of them.
Previously, Goldman had a “Neutral” rating on Lockheed Martin but cut it down to “Sell.” The stumbling block?
According to analyst Noah Poponak, Lockheed Martin doesn’t have a lot of room to engage in stock buybacks, which limits its potential.
Raytheon’s hit from Poponak took it down from “conviction buy” to “neutral,” thanks to its limited range for commercial aircraft. War may be good business, but so is peace.
Finally, Poponak’s swing at Northrup Grumman focused mainly on valuation issues. It’s currently at the high point of its historical value. That makes a downturn more likely, prompting a downgrade from “Neutral” to “Sell.”
Further, there are also macroeconomic issues to consider.
U.S. debt is on track to once again hit the legally-installed limits soon.
A hit to defense spending may come out of the Speaker of the House race and make matters worse. That could mean trouble for defense stocks as well. Poponak noted that investors have already factored in the impact of a “global geopolitical superpower struggle.” However, Poponak concluded, they don’t factor in “…a renewed focus on U.S. government cumulative debt.”
Defense stocks were already a bit jumbled, and Poponak’s projections likely won’t help. Northrop, for example, is a Moderate Buy. Further, its $543.69 average price target gives its shares 17.65% upside potential.
Meanwhile, Lockheed is only considered a Hold by analysts. Its average price target of $480.63 gives its shares an upside potential of just 7.26%.
The defense industry is also turning towards Augmented reality (AR) for training, manufacturing, and other use cases.
Augmented reality (AR) is not exactly new technology – the first functional AR systems stretch back to the early 1990s – but the situation in the defense industry has changed dramatically in recent years.
Once more of a novelty than practical technology, now military contractors use AR for everything from training to manufacturing to battlefield operations, and that trend is likely to increase.
As mentioned earlier, our research has led us to an Augmented Reality (AR) company that could be extremely well-positioned for significant growth in 2023.
—Stay tuned for our Augmented Reality (AR) Report.
Upcoming Key Economic Reports for Week of January 15th, 2023
Wednesday, January 18, 2023
– U.S. Retail Sales
– U.S. Producer Price Inflation (PPI) MoM
8:30 AM – U.S. Retail Sales
Retail sales in the US declined 0.6% month-over-month in November of 2022, much worse than market forecasts of a 0.1% fall.
It is the biggest drop so far this year, with sales of furniture (-2.6%), building materials (-2.5%) and motor vehicles (-2.3%) falling the most during the holiday season.
Other decreases were also seen at electronics stores (-1.5%), nonstore retailers (-0.9%), sporting goods, hobby, musical instruments and books (-0.6%), gasoline stations (-0.1%) and general merchandise stores (-0.1%).
In contrast, increases were seen in sales at food services and drinking places (0.9%), food and beverage stores (0.8%), health and personal care stores (0.7%) and miscellaneous retailers (0.5%).
Data for November, which includes the Black Friday and the Cyber Monday during which big discounts are offered, point to a slowdown in consumer spending amid high inflation and interest rates.
It also shows that holiday shopping was pulled forward into October, when sales jumped 1.3%.
8:30 AM – U.S. Producer Price Inflation (PPI) MoM
The Producer Price Index for final demand in the US rose 0.3% month-over-month in November of 2022, the same as an upwardly revised 0.3% increase in October and above market forecasts of 0.2%.
Cost of services went up 0.4%, the biggest gain in three months, led by securities brokerage, dealing, investment advice, and related services, which jumped 11.3%.
Cost of goods edged up 0.1%, led by a 38.1% surge in prices for fresh and dry vegetables while gasoline prices dropped 6%.
Compared to the same month in 2021, producer prices were up 7.4%, the smallest increase since May last year, but higher than expectations of 7.2%.
Thursday, January 19, 2023
– U.S. Initial Jobless Claims
– United States Building Permits
8:30 AM – U.S. Initial Jobless Claims
The number of Americans filing new claims for unemployment benefits fell by 1,000 to 205,000 on the week ending January 7th, well below expectations of 215,000. It was the lowest value in over three months, adding to recent evidence of a tight labor market despite the Federal Reserve’s aggressive tightening path last year. The 4-week moving average fell by 1,750 to 212,500. On a non-seasonally adjusted basis, initial claims soared by 60,799 to 339,286, solely due to seasonal factors at the turn of the year. The main increases were seen in California (+18,179) and New York (+17,507).
8:30 AM – United States Building Permits
Building permits in the United States tumbled 10.6 percent from a month earlier to a seasonally adjusted annual rate of 1.351 million in November 2022, the lowest level since June 2020 and compared to a preliminary estimate of 1.342 million, revised data showed. Permits, a proxy for future construction, have been falling as soaring prices and rising mortgage rates hit demand and activity. Approvals of units in the multi-family segment were revised up to 0.570 million from 0.561 million in earlier estimates; while permits for single-family units were unchanged at 0.781 million. Permits fell in the Midwest (-5.2% vs -6.2% in early estimates), the South (-12.4% vs 12.2%) and the West (-14.8% vs -16.4%) but rose in the Northeast (5.4% vs 1.8%).
Who Made New 52-Week Highs This Week?
Here are some notable highs as of Friday, January 13, 2023…
Taking the cake this week is Nine Energy Service (NINE) after climbing over 1,696% from its 52-week low.
Coming in second place this week is Ardelyx (ARDX) after moving up over 544% from its 52-week low.
Third place goes to Nls Pharmaceutics (NLSP) who climbed over 421% from its 52-week low.
Fourth place goes to Sunlands Online Education Group (STG) after they climbed over 417% from their 52-week low.
And rounding out the top 5 for our list of new 52-week highs is New Oriental Education & Technology Group (EDU) as they are up over 407% from their 52-week low.
If you’re interested in discovery stocks that have the potential for making 1,696%, 544%, 421%, 417%, and 407% moves like the top 5 stocks above, then you’re in luck…
Because we have been hard at work uncovering what could be the next big stock play for you.
You need to stay tuned and stay engaged because we just identified an Augmented Reality (AR) company that could be extremely well positioned for early 2023…
We are still finishing up our research but as soon as this report is done, you’ll be one of the first to see it…
So clear your plate and get ready.
—Stay tuned for our Augmented Reality (AR) Report