Trading opportunities: how to prepare for the Fed announcement
Has the support on the S&P 500 broken? Yes, kind of. The market closed at 3,899 on Monday and appears to be holding. The main question is how tomorrow’s announcement from the Federal Open Market Committee will affect the market. We are pretty sure they will raise interest rates by 0.75% as expected.
In this week’s livestream, we can provide reassurance as to why we don’t expect the Fed to raise rates more than that. However, traders are a little uncertain. But again, we are optimistic that the Fed will live up to expectations on Wednesday and stocks have a good chance to rally on Friday. Until the announcement is released, aimless volatile trading is the most likely outcome.
Technology, Tesla and social media
This week, we answered questions from some worried traders in light of the Fed’s announcement, and discussed some interesting questions from viewers on specific stocks. If you have any questions yourself, just drop a line in the comments section or email us at [email protected].
- Can we take a look at Microsoft? – John P.
- Tesla has been relatively strong lately compared to other tech stocks. What do you think of Tesla on the rise? – Steven G.
- Can you comment on Adobe and the recent purchase of (private technology company) Figma? – Kristen J.
- What about Twitter and other social networks? Do you find it useful for market analysis? – Greg B.
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Inventories fall on disappointing retail sales
In last weekend’s livestreamwe have covered a lamentable FedEx Corp. (FDX) earnings release and market reaction to various retail reports.
FedEx released a lackluster earnings report after Thursday’s closing bell. The delivery company will take cost-cutting measures, including grounding planes, making fewer Sunday deliveries and closing company offices. Because consumers are spending less online, FedEx has taken a hit. Other delivery companies like United Parcel Service Inc. (UPS) took a nice hit, but the market seems to have rebounded this week. FedEx rose 1% on Monday after taking a 21% hit on Friday after reporting earnings.
To add to FedEx’s misery, the Consumer Price Index (CPI) data was released late last week. Consumers make up 70% of the US economy and their budgets are squeezed by inflation, which is coming down very slowly. Overall prices were down 0.2% from July, but up 8.3% from the same time last year. Persistently high prices mean less spending, and if consumers don’t spend, the US economy may miss out on a soft landing as the Fed hikes interest rates to fight inflation.
The University of Michigan’s consumer confidence index came in on a slightly more positive note on Friday at 59.5, higher than August’s 58.2 measure but slightly below market expectations of 60. The index measures consumer sentiment regarding inflation, prices and spending. Consumers appear to be more optimistic that inflation will dampen their spending than they were when gasoline prices peaked in early summer, which is good news. We expect a promising report this week on the results of Costco Wholesale Corp. (COST), one of the consumer defensive stocks we like. He should tell us a bit more about consumer spending pending further reports in the sector.
The market is rolling with the swings and thankfully holding its own, hovering around the support at 3,900. This means that we are still not in bearish territory anytime soon. You always hear us say to buy on the dips, and we stick to that. It is the windows that create buying opportunities.
John Jagerson and Wade Hansen
Editors, Business Opportunities
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