Welcome to our weekly Market News Roundup 🗞️ — a huge shoutout to our 18 new subscribers this past week, thank you for being here!

After a brief hiatus, we’re back and better than ever with a new-and-improved format this week, thanks to some feedback from all of you!❤️ Here’s the 3-point agenda:

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

2. 📊 Interesting Set-ups: a few stocks worth watching

3. 🔭 Market Mood™ outlook for the week ahead

Part 1: Overall News Sentiment 🖼️

• Overall news: +36% sentiment, bullish 🟢

• S&P 500 (large cap) news: +29% sentiment, bullish 🟢

• Russell 2000 (small cap) news: +75% sentiment, very bullish 🟢⭐

The mood measured in stock market news coverage was welcomingly optimistic on the whole this week, especially given how rough the markets have been over the past few months. Overall, the average sentiment expressed in finance articles finished with a net score of +36% (on a scale from -100% to +100%), making it one of the most “bullish” weeks since the start of 2022. Zooming in, the sentiment expressed about the Russell 2000 Index was significantly bullish at +75% — a great sigh of relief for beaten-down small-cap stocks — while sentiment about the large-cap S&P 500 was also considerably bullish at +29%. This week’s upbeat news conversation was driven by the following:

😅 1. Markets narrowly avoid bear territory:

this week the major US stock indexes bounced back from their recent rough stretch, with the S&P 500 snapping its 7-week skid and surging nearly 7% to its best weekly result since November 2020.1 This sharp turnaround came just a week after the S&P narrowly avoided entering into an official “bear market” which is defined as a 20%+ decline from a recent high. Following suit, the other major indexes (Dow, Nasdaq, Russell) all rose between 5-6% on the week.

💫 2. Inflation’s sliiight moderation:

The recent release of April’s Personal Consumption Expenditures Price (PCEP) Index (which is the Fed’s “preferred” gauge for tracking consumer prices) showed that inflation did in fact moderate somewhat last month, at an annual inflation rate of 6.3%, down from the rate of 6.6% shown in March. While this still remains near its highest levels since the 1980s, it did bring some much-needed optimism into the markets.

🧈 3. Earnings do be churning:

With Q1 corporate earnings season now drawing to a close, data from FactSet revealed that companies in the S&P 500 recorded an average earnings gain of 9% over the same quarter last year, exceeding the majority of Wall Street analyst expectations. While this was a nice catalyst for the markets this week, let’s not forest that this still marks the slowest earnings growth rate since the fourth quarter of 2020. Across the 11 sectors, the energy sector saw far-and-away the strongest growth, with a whopping increase of 268% (!!) year-over-year (due to, you guessed it, the ongoing Russia-Ukraine crisis).

Part 2: Stocks to Watch 🔥🧊

here’s a quick look at three notable stocks to keep an eye on based on their sentiment expressed in stock market news coverage: Upstart, Rivian, and Palantir

1. Upstart ($UPST) 💵 — highly bearish 🔴

this week: 🔻-92% news sentiment | 🔺+24% stock price

After falling nearly 80% over the past 12-months, AI-lending platform Upstart was one of many speculative high-growth stocks to rise significantly on the market this week, climbing nearly 25% heading into Friday close. Upstart simultaneously finished as the most bearish stock in terms of average sentiment measured in news coverage this week, signaling $UPST stock price may be overhyped heading into this week.

Upstart’s pessimistic sentiment was driven by recent allegations of security fraud, with claims alleging the company is misleading investors about its artificial intelligence (AI) loan model. This negative news sentiment was compounded by speculation about potential credit-quality issues within its underwriting process, which may ultimately hamper the company’s bottom line.

2. Rivian Motors ($RIVN) 🏎️ — highly bearish 🔴

this week: 🔻-28% news sentiment | 🔺+14% stock price

EV startup Rivian Motors climbed 8% in share price as part of the broader rally this past week (yet still remains down -69% over the past 12-months), finishing back above $30 per share for the first time this month. However, like Upstart, Rivian’s news sentiment was highly bearish throughout the week, an indicator that $RIVN stock price may also be overhyped heading into this week.

Rivian’s negative news coverage was driven by the resignation of its chief executive in charge of manufacturing engineering, putting a bit of a damper on hopes that the company’s storied supply chain issues will improve in the near-term. This comes almost a month after the Amazon-backed company cut its 2022 full-year production targets, citing said supply chain constraints and lowered demand due to expected heightened interest rates.

3. Palantir ($PLTR) 💽 — undervalued, bullish 🟢

this week: 🔺+8% news sentiment | 🔺+6% stock price

Somewhat counter to the other two high-growth stocks mentioned above, Big Data company Palantir made waves for more optimistic reasons this week, finishing with an overall optimistic news sentiment rating of +8% to match its +6% gain in share price on the week (although it remains down nearly 60% over the past 12 months… noticing a pattern here?).

Palantir’s news optimism came as Wall Street reacted to its recently impressive growth numbers, which revealed that the company has increased their customer base by over 86% YoY (including recent partnerships with Stellantis and waste-industry software provider Rubicon), growing revenues and improving margins while growing its internal stock-based compensation pool. These are all fundamentally positive signs that $PLTR is intrinsically undervalued right now, a stark contrast to the negative news about $UPST and $RIVN which suggest core business model execution issues.

Part 3: Market Mood™ Outlook 🔭

With the markets bouncing back with a vengeance this week after falling for the previous seven weeks in a row, many are (naturally) speculating about what to expect in the weeks to come. While some claim that perhaps we’ve found the bottom and that the rally is here to stay (the relative frequency of the term “bull market” in stock market news reached a 1-year peak last week), the overarching majority seem to agree that we are experiencing a bear rally with the worst of the market’s woes still on the horizon. Here’s the breakdown:

• Last week was a perfect storm of rally-worthy news: April inflation slowed a bit, earnings season capped off better-than-expected, and the S&P 500 narrowly avoided officially bear market territory.

• However, macroeconomic indicators suggest that inflation will remain at ultra-high levels in the coming months, hampering the markets room to grow: The Fed is expected to further increase interest rates by a half a percentage point at their next two meetings — in essence, deliberately slowing economic growth in order to fight said inflation

• Looking back at past bear markets, it’s fair to assume that the worst is not even halfway over with: according historical data from previous S&P 500 10%+, the median duration of recessionary episodes is around 282 trading days — our current correction has only lasted around 94 days. Austin Hankwitz wrote a great post last week about this, including signals to look for to know when we’re approaching “bottom” — check it out here.

All in all, while we might expect this most-recent rally to stick around for a few weeks, perhaps even a few months, its highly likely that we see more bottoms by the end of the year. As for myself, here are a few more recent posts I’ve found useful for framing how to approach the bear rally:

• “Party’s Over” — Market Sentiment (May 29th)

• “Fool Me Once, Shame on You, Fool Me Twice Can’t Place the Blame on You” — Investment Talk (May 27th)

• “Weekly Market Wrap” — EdwardJones (May 27th)

• “Don’t Buy a Bear Market Rally” — Peter Schiff (May 28th)

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, and thank you for reading. 😎

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