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: +10% sentiment, neutral 🟡

• S&P 500 (large cap) news: -7% sentiment, neutral 🟡

• Russell 2000 (small cap) news: +40% sentiment, bullish 🟢

📈 US stocks snap their 3-week losing streak, pulled by small caps 🟢

• US stock indexes closed out the shortened Labor Day week with solid gains all around, snapping a three-week losing streak that sent the S&P 500 down more than -8%. Last week’s bump was strongest amongst smaller stocks, with the NASDAQ and Russell 2000 gaining +4% and +2% (respectively), while the S&P 500 and Dow each added between 1-2%.

🪀 Other assets: Bitcoin stays volatile, oil continues its descent 🟡

• Bitcoin: after falling below $19,000 earlier in the week, the price of Bitcoin (BTC) jumped almost +9% on Friday to more than $21,000. Despite the bounce, the world’s largest cryptocurrency is still valued at less than a 3rd of its $65,000 peak set last November.1

• Oil: after tumbling -6% two weeks ago, the price of US crude oil fell modestly, despite rallying on Friday to more than $86 per barrel. On Thursday, oil sank below $82 — its lowest levels of the past 8 months (lest we forget, oil was at $97 per barrel less than two weeks ago).

⛰️ Historic interest rate hikes across the pond in Europe 🔴

• After sitting at a 0% interest rate for the past 5+ years, the European Central Bank approved its biggest-ever interest-rate increase this week by lifting its key lending rate by +75bps (0.75%). This follows a +50bps rate hike in July, bringing the main refinancing rate in Europe to 1.25%.

• Policymakers expect rates to continue climbing over the coming months as Europe struggles to curb inflation, heading into what could be a particulary tough winter in terms of energy prices.

2. Stocks to Watch 🔥🧊

A quick look at two notable stocks to keep an eye on based on their sentiment detected in stock market news coverage: 3M and Shopify

3M Company (MMM) 🧑‍🏭 bearish sentiment 🔴

this week: 🔻-76% news sentiment | 🔻-2.5% stock price | view news profile

Industrial materials juggernaut 3M finished this week as one of the most bearish stocks in Wall Street conversation while falling -2.5% in stock price to $123.10 per share, extending its downward skid to a total of -17% over the past month. 3M's negative news has centered around an ongoing lawsuit involving its military earplug subsidiary Aero, which has now become the single largest multi-state litigation in US history.

The lawsuit against 3M (and subsidiary Aero) was brought by a large group of US military veterans who claim they’ve suffered hearing impairment stemming from the use of Aero earplugs — and without going too far into the details, the end result could be damages payouts of unprecedented proportion; and things seem to just be getting started.

So far, plaintiff service members have won 13 out of 19 cases brought to court, resulting in personal injury damages totaling $265M. And with more than 230,000 veterans (!!) remaining on the docket for 3M for litigation, 3M’s $7.9B in cash and marketable securities on hand as of last quarter could quickly be eviscerated, with a worst-case scenario potentially resulting in 3M dedicating earnings to fund rewards, cutting dividends, or even raising debt/equity. More here:

Shopify (SHOP) 🛒 bullish sentiment 🟢

this week: 🔺+58% news sentiment | 🔺+9.4% stock price | view news profile

On the flip side of the pillow, Canadian e-commerce giant Shopify came out as one of the most bullish stocks this week according to sentiment measured in market news coverage, rallying more than +9% to $34.81 per share in reaction to some big new hires in the company's C-suite. On Tuesday, Shopify announced that former Morgan Stanley investment banker Jeff Hoffmeister (who led Shopify's IPO back in 2015) will take over as CFO, while Kaz Nejatian (Shopify's current VP of product) will become COO. The question: why did this game of executive musical chairs make waves in the news?

For one thing, with Shopify’s slowing sales numbers and rising costs in recent quarters (the company posted a massive loss in Q2), some see the management change as a signal that the company is gearing up for new growth — and by growth, we mean acquisitions. Shopify recently completed its $2.1B purchase of fulfillment specialist Deliverr, so adding Hoffmeister (with his long-time experience managing technology investments) certainly seems like a position play to enable more acquisitions of the like — after all, why innovate when it’s often easier to buy your way there. Are we seeing the Google-ification of Shopify?

3. Market Mood™ Outlook 🔭

After 3 consecutive weeks of increasingly pessimistic overall net-sentiment expressed in stock market news coverage, this week took a much-needed departure towards optimistic territory, with net sentiment coming out at +10% (slightly bullish) as stocks posted their first rally of the past month. Looking ahead to the rest of this month, two major economic events will determine the fate of the stock market over the near-term:

Monthly Inflation Report (CPI):

tomorrow, Sept. 13th

• Set-up: economists are generally expecting (or perhaps hoping) that this month’s inflation report will show further signs of cooling consumer prices, with the consensus CPI estimate for August putting headline inflation at 8.1% YoY— this would mark aconsiderable decline from July’s 8.5%, and June’s 9.1% (which was the highest in the past 40+ years).

• Implications: if inflation comes out at or below estimates, we can likely expect a knee-jerk positive reaction on the stock market and write the week off as a success. On the flip side, if the number comes out above the consensus estimate of 8.1% (or God forbid higher than 8.5%) then things could get pretty ugly.

Monthly Federal Open Market Committee (FOMC) meeting:

next week, Sept. 21st

• Set-up: with tomorrow’s inflation setting the stage, the real action to follow will come from next week’s FOMC meeting, at which the Fed will determine how to proceed with Fed Fund rates for the year. Most expect the Fed will deliver a 3rd consecutive rate increase of 75bps (+0.75%) as it continues to target inflation which would put the Federal interest rate right above 3.0% in all.

• Implications: while some believe the Fed may change course if tomorrow’s inflation reading comes out below expectations, it seems highly unlikely (unless we see inflation immaculately below something like 7% or something). We’re still a long way from the Fed’s 2% inflation target — with most expecting at least another 6 months for the US to get even close — so continued hawkish-ness from the Fed seems like what’s on the lunch menu for the time being.

• If inflation comes out higher (ie. we’re still moving in the wrong direction), that’s when I might begin to worry about stocks getting pretty wacky and volatile. Compare where we are now (in terms of the $VIX, which measures short-term expectations of volatility) vs. how things looked in pre-recession 2008, and things could become eerily similar.

Some would call it the precipice of an all-out nose dive. For now, all we can do is wish for the best. 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: