Market News

Weekly Market Review: Prospect of Higher Rates Sparks Volatility

Story Highlights

Our weekly review of the market. U.S. stocks fell about 1% across the board on Friday and the S&P 500 snapped a four-week winning streak. Our Stock of the Week is a Consumer name.

U.S. stocks fell about 1% across the board on Friday and the S&P 500 snapped a four-week winning streak. Volatility also increased, as monthly options expired. Communication Services names led the way lower, while the Consumer Staples sector rallied.

In economic action, the minutes from the latest FOMC meeting suggested that interest rate increases could continue throughout 2022. Fed funds futures are currently pricing in a 78% probability that rates could be 100 to 125 basis points higher by the end of the year.

Elsewhere, core U.S. retail sales showed surprise growth in July, excluding autos.

The Week Ahead

Medtronic (MDT) kicks off the earnings calendar on Tuesday, followed by Salesforce (CRM) and Nvidia (NVDA) the following day.

On the economic front, the preliminary August purchasing managers’ index (PMI) data will be released on Tuesday, followed by durable goods orders a day later.

The first revision of second-quarter GDP is due out Thursday and the core PCE price index will be announced on Friday. The latter is the key inflation gauge of the Federal Reserve.

Given a slowing growth outlook and the prospect of higher interest rates, it could become hard to come by investment gains in 2022. As a result, deciding what and when to buy can be challenging for any investor. However, the fact remains that investments with upside potential and other positive signals are out there if you dig a little deeper. One such Consumer name is worth a closer look and is our Stock of the Week.

Stock of the Week: BJ’s Wholesale (BJ)

The company is a warehouse retailer, with 225 locations primarily in the eastern U.S. The stock gained 8% last week and is showing signs that it has the potential to continue this relative outperformance into the final months of 2022. Here’s why:

Even though all consumer-facing names face inflationary pressure, we believe that BJ’s has a competitive advantage by offering shoppers a value prospect to buy in bulk.

This has been apparent in the company’s operating results, as management has met or exceeded the consensus analyst profit estimate for 17 straight quarters.

The most recent occurrence came Thursday when the retailer earned $1.06 a share in the July quarter. Revenue increased 22% from the previous year to $5.1 billion and also topped expectations.

Upside in the period was driven by gains in store traffic and market share. Membership fee income also grew by 11.3%.

Following the report, the stock was upgraded at Bank of America, to Buy. Analyst Robert Ohmes set a price target of $83, reflecting 12.5% upside potential.  

In the meantime, the company carries an “Outperform” Smart Score of 10/10 on TipRanks. This data-driven stock score is based on 8 key market factors.

On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen improving sentiment from hedge funds, financial bloggers, and individual investors.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio, a weekly newsletter that blends big data, and market insights.

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