The broader U.S. stock market averages were mixed on Friday, as the S&P 500 lost more than 1% last week. Information Technology names led the way lower, while the Healthcare sector was the best performer.
Last week, investor focus was centered around the Federal Reserve and interest rates. The minutes from the latest FOMC meeting were released on Wednesday. They showed that monthly bond-buying will be reduced to $95 billion.
In addition, traders increasingly believe that the Fed may boost rates by 50 basis points to quell inflationary pressures. This shift is also being felt further along the curve, as the yield of the benchmark 10-year U.S. Treasury note is at 2.7%.
The Week Ahead
There will only be four days of trading next week, as U.S. markets are closed on Friday for a holiday.
JP Morgan Chase (JPM) kicks off the first major week of earnings season on Wednesday. This is followed by Morgan Stanley (MS), UnitedHealth (UNH), and Wells Fargo (WFC) on Thursday.
According to Refinitiv, aggregate S&P 500 profit is expected to increase 6.1% in the first quarter. Backing out the Energy sector, which benefited from higher commodity prices, earnings are expected to have declined from the previous year.
In economic action, U.S. consumer prices (CPI) will be announced on Tuesday, followed by producer prices (PPI) a day later.
U.S. retail sales are on the calendar for Thursday, as is the preliminary April reading of the University of Michigan consumer survey. The latter also contains an important inflation component.
Following the snap-back recovery in stocks over the past several quarters from Pandemic lows, we believe that investment gains will be harder to come by in 2022, given a slowing growth outlook and the prospect of higher interest rates. As a result, deciding what and when to buy can be challenging for any investor. However, the fact remains that attractive investments are out there if you’re willing to dig a little deeper.
One such Consumer name is worth a closer look and is our Stock of the Week.
Stock of the Week: Dollar Tree (DLTR)
The company is a discount retailer under the Dollar Tree and Family Dollar brands. It has over 15,000 locations across the U.S. and Canada.
The stock gained 2% last week and we believe this outperformance can continue in the first half of 2022. Here’s why:
With inflation rising, more consumers will likely be looking for value at discount retailers. This was apparent in March when management posted better-than-expected quarterly earnings.
The company earned $2.01 a share in the fourth quarter of 2021, as revenue increased 5% from a year ago. Same-store sales were also up 2.5% in the period.
In the meantime, the stock carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.
On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen improving sentiment from analysts and investors (hedge funds and individuals), in addition to financial bloggers.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.
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