Welcome to our weekly Market News Roundup 🗞️

A huge shoutout to our 32 new subscribers (!!) this week — thank you for being here! Here’s the 3-point agenda:

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

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Part 1: Overall News Sentiment 🖼️

• Overall news: -8% sentiment, neutral 🌑

• S&P 500 (large cap) news: -25% sentiment, bearish 🔴

• Russell 2000 (small cap) news: +67% sentiment, strongly bullish 🟢

After a pretty bearish week on the markets and in the news two weeks ago, sentiment expressed in stock market news coverage finished relatively mixed this week as stocks recovered. In particular, while news coverage about smaller-cap stocks in the Russell 2000 came in at a highly bullish net sentiment score of +67%, sentiment measured in larger-cap S&P 500 conversation was considerably bearish at a score of -25%.

On the whole, overall market news sentiment ended the week with a net score of -8%, indicating a somewhat neutral mood along with high degrees of uncertainty about the market’s future. The mood of this week’s news was driven largely by the following topics and events:

📈 1. Stocks: markets bounce back to end Q2 on a high note

• After falling hard for three straight weeks, the major US stock indexes climbed back this week, with small-caps in the NASDAQ and Russell 2000 surging more than 7% each, while the large-cap S&P 500 and Dow both added between 5-6%. The results marked a near mirror-image reversal from the previous week, when the S&P fell into a bear market as it tumbled more than 20% from its recent high back in January.1 

🎭 2. Other investments: crypto’s stabilize, commodities retreat

• A week after free-falling roughly 30%, Bitcoin has finally stabilized around the $20,000 to $21,000 range, with the global cryptocurrency market cap now hovering around the $1 trillion mark — providing some near-sided relief for crypto traders, though the market remains near its highest levels of volatility since early 2021.

• On the commodities side, the price of US crude oil fell for the second week in a row, landing near $107 per barrel amid growing concerns about recessionary inflation and rising interest rates.

📊 3. Economy: sagging manufacturing indicators, Russian ruble soars

• The S&P Global’s Purchasing Manager’s Index (PMI) — a monthly survey of manufacturing activity — revealed that growth in US economic activity across manufacturing and services fell to its lowest level in five months, while a similar survey for Europe showed eurozone growth fell to a sixteen-month low.

• Meanwhile, Russia’s ruble reached its highest level since 2015 behind incredibly strong exports, despite the massive sanctions from the West. The ruble is now at 52.3x the dollar, and has actually gotten so strong that Russia’s central bank is actively taking measures to try to weaken it, fearing this will make the country’s exports less competitive. 

Part 2: Stocks to Watch 🔥🧊

here’s a quick look at two notable stocks to keep an eye on based on their sentiment expressed in stock market news coverage: Teladoc and Snowflake

1. Teladoc Health ($TDOC) 🩺— bearish sentiment 🔴

this week: 🔻-98% news sentiment | 🔺+28% stock price

While it was a hot week for smaller-cap stocks on the market, the lesson here is that not all high-tech small cap stocks are created equal. Shares of telemedicine stock $TDOC rose +28% to finish the week at $37.17 per share — which seems impressive at first glance. But diving deeper, it appears $TDOC’s rally came mostly as the residual effect of the broader small-cap market’s upward trend, and that news sentiment about Teledoc itself was actually highly bearish (at a net sentiment score of -98%), signaling that the stock may be overvalued and ready for reversal.

In particular, this week’s negative sentiment about Teladoc centered around several recent reports of class-action lawsuits against the company, alleging that its executives have misled investors about its business and financial prospects amid increasing competition in the telehealth space. After becoming a Wall Street darling during the early days of the pandemic (back when people thought the idea of virtual doctor visits seemed promising), Teladoc’s recent financials have revealed the company is hemorrhaging money as people return to in-person visits, with its most recent earnings report coming in at a net loss of -$6.67B. According to analysts, there are clear cracks in Teladoc’s fiscal foundation, and plenty of reason to stay on the sidelines over the near term. Even after the rally, $TDOC stock remains down -80% over the past year.

2. Snowflake Inc. ($SNOW) ❄️ — bullish sentiment 🟢

this week: 🔺+71% news sentiment | 🔺+32% stock price

On the other side of the pillow, cloud computing-based data warehousing company Snowflake came in near the top of the prospect list this week. Sentiment expressed about $SNOW reached newly optimistic levels in news coverage this week, finishing with a net sentiment score of +71% (which is higher than 77% of all stocks in conversation) as the stock climbed +32% to $151.53 per share. This heightened bullishness came primarily as the result of a revised “Buy” rating and increased price target of $165 from JPMorgan analyst Mark Murphy on Thursday.

In his rating, Murphy wrote that the company has “surged to elite territory” amongst cloud data service providers, referencing JPMorgan’s annual Chief Investment Officer survey which revealed that Snowflake ranked first in terms of increased spending intentions over the next year and also first in terms of what products impressed CIO’s the most. Along with $SNOW’s excellent standing among tech execs, Murphy also cited that the stock is trading -68% below its November high (vs. a -20% decline in the SP 500), signaling the stock has reached undervalued territory and could be a great pick-up for long-term growth investors.:

Part 3: Market Mood™ Outlook 🔭

As the first half of 2022 draws to a close, stock market news sentiment ended last week with a mix of bullishness and bearishness expressed in reaction to the market’s rally.

On the one hand, investors and analysts were optimistic about the market’s bounce, given it was only the second net-positive week for the S&P 500 and NASDAQ of the past 12 weeks — leaving some hope that we may finally be reaching our bottom.2 Yet on the other hand, analysts note that bear market rallies like the one we saw last week are typical of early recessionary periods, and there’s still plenty of rhyme and reason to expect a continued downward trajectory. Here’s some more info about what to expect as we prepare for the 2nd half of the year:

🐻 1. Bear Market Bounce (Phase 2):

First, taking a look at how the major stock indexes have behaved over the past 6-12 months, it appears the rally we’re experiencing could be ushering in the second phase of a longer Bear trend. The Twitter thread below from @The_RockTrading visualizes this well along, with potential catalysts and data that could swing us in either direction. For the most part, the catalysts for another big downward turn appear more likely than not, though not inevitable — we outlined some potential theories for how the markets could avoid the downward spiral in last week’s roundup here.

📜 2. History doesn’t repeat, but it does rhyme:

Zooming out, the Federal Reserve continues to grapple with inflation, and in my view, the necessary actions to contain runaway inflation still look more likely than not to push the US economy towards recession. Historically speaking, when persistent heightened inflation occurs (particularly within energy prices, like we’ve seen with oil) the Federal Reserve has two choices to try and stabilize prices: either increase the supply, or destroy demand.

Increasing supply (in the case of oil) is essentially futile right now, given the US is running at a record deficit of 1.5M barrels per day. The (more likely) alternative is for the Fed to continue hiking interest rates (as they’ve begun setting expectations for), in return reducing the amount people are willing to buy and pushing the stock market into a recessionary trend; @ChickenGenius on Youtube summarizes this dynamic well in this video, and I think the historical energy price chart during recessionary periods (below) paints the picture well:

For some further reading about how the markets feel as we head into Q3 2022, I’d suggest checking out the following weekly reports from SeekingAlpha (Wall Street Breakfast) and Edward Jones:

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! Lastly, we will be taking a break from our regularly scheduled roundup next week for the 4th of July (to return better than ever the following week). Best of luck to all of you in the markets this week, 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.