Wall Street is wobbling ahead of Tuesday’s open, as big earnings loom and with ample, gloomy distractions out there.
Fighting has ramped up again in Ukraine as the battle begins for the country’s eastern front. Apart from the tragic humanitarian crisis, the conflict is already causing the World Bank and others to cut their global growth forecasts.
Where to invest against such a volatile backdrop? Our call of the day from Goldman Sachs strategists offer up a group of equities they say can hold their in these uncertain times.
“Stable stocks –- those with low share price and earnings growth volatility -– typically outperform in environments of slowing economic growth and tightening financial conditions,” say a team led by Ben Snider and David Kostin in a note from late Monday.
After lagging dramaticially against a strong global economic backdrop for the past two years, their stable stocks basket has outperformed the S&P 500
by 5 percentage points over the past six months, with more “room to run,” they say.
Those stocks remain cheap, trading at a price/earnings premium of around 8% versus a 35-year average of 15%. During a similar batch of slowing growth and Fed tightening in 2018, the premium hovered at 20% for that group, they note.
“Despite recent outperformance, stable stocks do not appear to be pricing the slowdown suggested by recent industry rotations or our economists’ GDP forecasts,” said Goldman.
As for the stock names, their stable basket consits of 50 Russell 1000
stocks with the most stable EBITDA growth over the past 10 years. Excluded are those whose biggest year-over-year earning fall in the past five years ranked in the bottom 10% of their sector. Stocks in the bottom 10% of their sector based on consensus 2023 EPS expectations are also excluded.
From communication services, Sirius
and Warner Bros
are included. Consumer discretionary names include Domino’s Pizza
and Genuine Parts
are in the consumer staples batch. For energy, they like Williams Co
Financials names include Marsh & McLennan
Bank of New York
and Northern Trust
while Sonoco Products
is the sole materials stock. ResMed
Johnson & Johnson
are among the health care names, Verisk Analytics
and Waste Management
for the industrials names and AmDocs
are within a huge batch of IT names.
is in the earnings spotlight, with investors looking for a rebound from the streaming giant’s results, due after the market close. Ahead of that, Johnson & Johnson
stock is down on disappointing results and Hasbro
also falling on earnings news. IBM
is also reporting late.
Southwest , American
, Alaska Air
are creeping higher after a judge in Florida struck down the national mask mandates for the transportation sector and those companies dropped mask mandates. There was cheering and jeering on some flights:
St. Louis Fed President James Bullard said he wouldn’t rule out a 75-basis point rate hike, with Chicago Fed President Charles Evans and Minneapolis’s Neel Kashkari due to speak Tuesday. Housing starts are ahead of that.
G20 finance ministers and central bankers meet in Washington later, with a focus on fallout for the global economy from the Ukraine war.
Russia has issued a new ultimatum to Ukrainian holdouts in Mariupol, as its forces launched a fresh attack on the eastern front of the country in what many see as a new phase of the war.
were steady, while bond yields
hold steady. Oil
and natural gas prices
are down. Europe stocks
are falling and Asia was mixed, with a 2% tumble for the Hang Seng
led by tech despite a supportive move by China’s central bank. Elsewhere, the Japanese yen
keeps sliding and cryptos are bouncing back with bitcoin
back over $40,000.
“While the close proximity in the timing between the first [Fed] hike and curve inversion perhaps points to a more truncated late-cycle period this time, the current cross-market setup does not point to a return to the correlation between curve flattening and subsequent bearish equity performance that existed during the late-1960s and through most of the 1970s,” said a JPMorgan team led by Jason Hunter.
They see a likely floor for the index at 4,100 to 4,300, and “view the the current price action as a consolidation related to the initial removal of accommodative monetary policy.”
These were the most-searched tickers on MarketWatch as of 6 a.m. Eastern Time:
Longtime MSNBC national security analyst joins the fight in Ukraine
The “cash me outside” teen who shot to fame by trying to fight Dr Phil, pays all cash for $6.1 million mansion.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.