Welcome to the weekly Market News Roundup 🗞️ folks! 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

In case you missed last week's retrospective review of this newsletter’s track record at picking stocks based solely on news sentiment over the past 6 months, you can get up to speed by clicking here

1. Overall News Sentiment 🖼️

• Overall news: -9% sentiment, slightly bearish🔴

• S&P 500 (large cap) news: -15% sentiment, bearish🔴

• Russell 2000 (small cap) news: -5% sentiment, slightly bearish🔴

📉 Stocks: market continues its decline into bear territory

• Although losses weren’t as steep as those in the previous two weeks, the major US stock indexes fell nearly 3%, declining for the sixth time in the past seven weeks. The Dow on Monday joined the S&P 500 and the NASDAQ in bear market territory, declining by a total of more than -20% from its level of early January.1 

• Zooming out to the month as a whole, the stock market’s late summer downturn extended into September as the major US indexes fell for the third quarter in a row. The S&P 500 and the Dow both posted monthly declines of around 9% and the NASDAQ dropped more than 10% — all steeper than the prior month’s losses.

🦅 US Economy: the bond market’s tumultuous stretch

• The yield of the 10-year US Treasury bond rose modestly in what was otherwise an unusually volatile week in the bond market. The yield surged as high as 3.99% on Tuesday to the highest level in 14 years. The next day, it tumbled to 3.71% before ending Friday’s trading at around 3.80%.

• Abroad, world economies at large are struggling to keep up with the strength of the US dollar — last wee, Japanese authorities intervened for the first time since 1998 to support the yen after it’s weakened -20% against the dollar this year.2

🌎 Global Affairs: surging Euro-flation amidst Russian tension

• Rising energy costs fueled another spike in European inflation, with the eurozone reporting that its key inflation gauge rose at an annual 10.0% rate in September, up from 9.1% the previous month. Separately, Germany reported an even steeper increase, with inflation climbing to 10.9% from 8.8% the previous month.

• This comes amidst rising tensions in Russia, as it’s now become apparent that Nord Stream 1 & 2 (the two major offshore pipelines that serve as a primary supply of natural gas from Russia to northern Europe) were deliberately ruptured earlier this month. Denmark now claims that pressure in both pipelines has been re-stabilized.

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:

Walt Disney (DIS) 🏰 bearish sentiment 🔴

this week: 🔻-95% news sentiment | 🔻-4.7% stock price | view news profile 📰

Sentiment expressed about Walt Disney Co. in the news finished largely pessimistic this week at a -95% sentiment rating as stock fell -4.7% to finish at $94.33 per share, marking a -40% in price thus far into 2022. This week's negative news coverage about Disney centered primarily around the company's contract dispute with television providers, with Disney ultimately blocking its content across both Dish TV and Sling TV after the parties were unable to reach an agreement over a contract extension earlier this week.

The dispute affects access to Disney channels that include ESPN, FX, the Disney Channel, and ABC local stations in several major markets. Dish and Sling both stated that Disney “walked away from the negotiation table” and refused to provide its content to millions of their US customers, calling it an exploitation of Disney’s market position in an effort to increase fees.

For Disney’s part, it appears unlikely that a deal will remain unbrokered, especially considering that the company’s linear networks (ie. TV & streaming content served via external providers like Dish, Sling, and DirectTV) accounted for more than a third of its revenue last quarter (below).

top Disney (DIS) headlines this week:

“Disney pulls its content from Dish and Sling TV over rate disagreement” ~ CNN

“The Walt Disney Co. forces channel blackout for millions of Dish TV and Sling TV customers” ~ PR Newswire

Adobe (ADBE) 🎞️ bullish sentiment 🟢

this week: 🔺+87% news sentiment | 🔻-3.7% stock price | view news profile 📰

After crumbling -15% in stock price and reaching a 2-year low of $274 per share two weeks ago following a somewhat underwhelming Q4 earnings report, photo & video software company Adobe turned around this week and saw the biggest increase in news sentiment optimism on the market after reaching a deal to buy the web-based collaborative design platform Figma for $20B.

While the Figma announcement was initially met with pessimism from its users on Twitter — primarily worrying that the acquisition could eliminate the fan-favorite free tier of Figma, given Adobe’s tendency towards subscription-based revenues in recent times (shown below) — the sentiment from analysts on Wall Street appears much rosier. For Adobe, the deal is a major strategic play two-fold: taking out one of its biggest rivals in the design & prototyping space, and expanding its market share down the content creation chain. 

And despite the whopping $20B Adobe will be paying out to finalize the deal, it appears they won’t be going into debt to fund the purchase, a strong positive sign for investors. Add in the fact that Figma’s financials have been fairly impressive (boasting a roughly 90% gross margin at a 150% net dollar retention, which is among the best in the industry), and it seems Adobe would do well to keep Figma’s pricing model as is; seemingly a win-win-win for all parties, and perhaps a bargain buy for investors at 's current price.

top Adobe (ADBE) headlines this week:

“Why Adobe is paying $20 Billion for Figma” ~ The Motley Fool

“Adobe and Meta: both are buys, but only one could change your life” ~ Seeking Alpha

3. Market Mood™ Outlook 🔭

It was yet another week of overarchingly negative news coverage with the markets falling significantly for the 3rd-straight week, as it appears that Wall Street & the Fed are pricing in a new base-case scenario: economic downturn. Market volatility has reemerged, the S&P 500 has reentered bear-market territory (down -23% for the year), and all parties seem to finally agree that the US economy is entering a true recession — which, for the record, we’ve been discussing since late April.

Now, with seemingly everyone on board, we may as well strap in and enjoy the ride. Looking ahead into an extended bear market, the question is: how do we know when the bottom will be? And while of course the market is notoriously impossible to time perfectly, there are a few signs we can look towards to know when we’ve arrived: lower inflation, stabilizing bonds, and/or a softening US dollar.3

🛣️Signs: 3 indicators of market bottoms

1. Lower inflation: with the CPI remaining near its 40-year high above 8% YoY inflation, Jerome Powell and the Federal Reserve have made it crystal clear that bringing down inflation is priority #1 — no matter the cost. We can expect interest rate hikes to continue at least until we see at least 3-4 downward monthly movements in the CPI, meaning the earliest we can expect a bottom is likely by the end of this year — we’ll learn more when September’s CPI is released on October 13th.

2. Stabilizing bonds: as we mentioned earlier, the 10-year US Treasury yield is hovering near a 14-year high around 4%, putting some serious downward pressure on the US equity markets and corporate valuations. Once we start seeing downward movement (which typically happens within two months of the final Fed rate hike), that’s a good sign that we’ve past the worst of it.

3. Softening USD: lastly, with the US dollar moving higher all year (the DXY dollar index is up +17% this year and +25% since early 2021) — driven by relative rate moves from the Fed vs. global central banks — any significant softening would indicate a subsequent strengthening of the global economy, easing international financial conditions and supporting a potential recovery.

As always, the future remains to be seen. Looking ahead to this week, we’ll watch for September’s monthly jobs report from the US Bureau of Labor Statistics for more signs about the trajectory of the US economy.

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 cited below: