Welcome to our weekly Market News Roundup 🗞️

Here’s the agenda for today’s quick news review:

1. 🖼️ Big Picture: this week’s overall market sentiment

2. 📊 Interesting Set-Ups: a couple stocks worth watching

3. 🔭 Market Mood™ outlook for the week ahead

1. Overall News Sentiment 🖼️

• Overall news: -16% sentiment, slightly bearish🔴

• S&P 500 (large cap) news: -33% sentiment, bearish🔴

• Russell 2000 (small cap) news: -25% sentiment, bearish🔴

📈 Monthly inflation reading was higher than expected at 8.5% 🔴

• According to Tuesday’s monthly release of the Consumer Price Index, August inflation came out at an annual rate of 8.3%, higher than the consensus estimate of 8.1%. While this is still a step in the right direction from July’s reading of 8.5%, the slow descent all but confirms that the Fed will continue with projected interest rate hikes of +75bps (0.75%) at their FOMC meeting next week.

🌧️ Markets: stocks had their worst week since June 🔴

• Following the inflation reading, the stock market reacted as we might have expected: rather pessimistically. Tuesday marked the steeped daily decline across the major US stock indexes since the early days of the pandemic in March 2020 — the NASDAQ fell -5.2%, the S&P 500 dropped -4.3%, and the Dow fell -3.9%. On the whole, stocks finished the week with their worst 5-day performance since June.

🔬 Red ahead: analysts are shrinking their Q3 earnings outlooks 🔴

• Looking ahead, expectations for next month’s batch of Q3 earnings reports have begun to diminish in suit; analysts surveyed by FactSet expect that third-quarter earnings for companies in the S&P 500 will rise by an average of 3.7% relative to the same quarter a year earlier — that’s down from expectations of 9.8% growth when analysts were surveyed at the end of June.1

2. Stocks to Watch 🔥🧊

Now, a quick look at two notable stocks to keep an eye on based on their sentiment detected in stock market news coverage this week: Peloton and J&J

Peloton (PTON) 🚴‍♀️ bearish sentiment 🔴

this week: 🔻-95% news sentiment | 🔻-5.7% stock price | view news profile

In my book, Peloton might be the poster child of COVID-era hype stocks that have been absolutely buried over the past 6 months. For those of you keeping score, stock price has fallen roughly -94% (!!) from its December 2020 high of $162, and is now sitting at $9.74 per share after falling another -5.7% this week. Singing that same old song and dance, Peloton finished as the most bearish stock in this week's news coverage (its 4th time topping the list in the past 6 months) -- this time catalyzed by one major event: its cofounders are now exiting the company.

On Monday, Peloton announced that co-founder John Foley will resign as executive chairman, departing alongside fellow co-founder and chief legal officer Hisao Kushi as part of a broader shake-up of the company’s C-suite. While this marks the end of an era for the struggling fitness equipment & media company, new CEO Barry McCarthy says cleaning house was the only way to pull off what he calls “a massive transformation plan” for the company going forward.

In the news, analysts have had mixed reactions to Peloton’s changing of the guard — while on one hand the company loses its visionary founders (responsible for much of the company’s growth over the past decade), McCarthy’s experience as an exec with the likes of Netflix & Spotify might set the stage for the company to forego growth opportunities and focus more on what matters most right now: positive cash flow. Going forward, I’ll be cautiously keeping an eye out for any signs of light at the end of the tunnel for Peloton that could make its current $9.75 share price a bargain bin buy over the long-term:

this week’s top Peloton reads:

• “Peloton Cofounders are Leaving the Company” ~ CNBC

• “Peloton Stock Just Got a Whole Lot More Interesting” ~ The Motley Fool

Johnson & Johnson (JNJ) 💊 bullish sentiment 🟢

this week: 🔺+87% news sentiment | 🔺+1.1% stock price | view news profile

On the cooler side of the pillow, healthcare & pharmaceutical giant Johnson & Johnson was the most bullish stock in market news coverage this week, coming out as one of only a few tickers to close the down week with a higher stock price (+1%). Johnson & Johnson's news optimism mostly came after the company unveiled a $5B share buyback program and reaffirmed its full-year profit targets in an announcement on Wednesday.

The buyback program (which means that J&J intends to use its free cash on hand to repurchase outstanding shares of its stock) is a great show of strength — the company said the buyback plan (which will be funded by cash) will have no time limit and will target the group's 2.63 billion in outstanding common stock. 

Why the buybacks? Companies will typically authorize repurchase programs like this to return value to their shareholders, either directly in the form of dividend payments, by increasing the price of its shares via explicit demand from the company; in this case, J&J intends to do both. Along with the buyback, the company’s announcement also reiterated its 2022 earnings forecast of between $10.65 and $10.75 per share, with adjusted operational sales growth of between 6.5% and 7.5%. All-in-all, J&J reaffirmed its position as a great value stock for long-term holders, and investors / analysts alike all seem to be onboard:

this week’s top Johnson & Johnson reads:

• “Johnson & Johnson stock gains after unveiling $5B buyback program” ~The Street

• “Why JNJ Increased 1.7% Today” ~ The Pulse 2.0

3. Market Mood™ Outlook 🔭

After one of the toughest weeks on the markets of the past few months — driven by a higher-than-expected monthly inflation report — news sentiment followed suit to end the week net-negative. Looking ahead to the upcoming week, all eyes will be on the Federal Reserve’s Monday-Wednesday policy meeting to set the tone for the markets. Given the persistent inflationary backdrop, Fed officials are almost certainly expected to deliver a third-straight 75 basis-point (+0.75%) increase to the national benchmark interest rate.

Across the board, analysts are expecting the Fed’s revised economic projections to hint at slower growth, higher unemployment, and likely a higher terminal interest rate — all signs of a harder “landing” than we might have hoped for a month or two ago. Fed Chair Jerome Powell’s speech scheduled for Wednesday afternoon will be the ultimate indicator of whether or not we can expect near-term relief or continued sharper declines. The biggest question will be whether or not the Fed will be able to pull off curbing inflation without self-detonating the economy like what happened in 2008, and as of now, things are looking eerily similar…

We’ll see what Jerome has to say. As always, the future remains to be seen. That’s all for this week — let us know if there’s anything we missed by commenting below, replying to this email, or sending us a text at +1 (833) 878 9106. And if you liked this post, please support us by clicking the like button! Best of luck to all of you in the markets this week, stay safe out there, and thank you for reading. 😎

Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Credit to the respective teams at John Hancock Investment Group, cited below: