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Plus 5 New Strong Buys for Today
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Stocks Down As Market Awaits More Economic Data

Stocks closed mostly lower again yesterday, making it 4 days in a row for the Nasdaq, and 5 for the S&P.

Interest rates, inflation, and recent talk of recession again have weighed on stocks.

We'll get another look at inflation with Friday's Producer Price Index (PPI) report.

And next week, the Fed will wrap up their 2-day FOMC meeting on Wednesday, December 14. The Fed is widely expected to slow down their interest rate hikes from 75 basis points to 50 bps this time.

As for renewed talk of recession, that seems awfully premature at best. For one, we just came out of a recession. Q1 GDP was down -1.6%, while Q2 was down -0.6%. (Two down quarters in a row is the technical definition of a recession.) However, Q3 was up a sharp 2.9%. (It's no longer a recession when the economy starts growing again.) And Q4, according to the Federal Reserve Bank of Atlanta's GDP Now forecast, is projected to come in at 3.4%. Those are not recessionary numbers.

In other news, MBA Mortgage Applications were down -1.9% w/w, with purchases down -3.0% and refi?s up 4.7%.

And the Productivity and Costs report showed nonfarm productivity up 0.8% annualized vs. last month's pace of 0.3% and views for 0.4%. Unit labor costs rose 2.4% vs. last month's 3.5% and the consensus for 3.3%.

Today we'll get Weekly Jobless Claims, and the Quarterly Services Survey.

Traders are also following developments in China. As the Country loosens Covid restrictions, that should bring about an uptick in output, and help ease supply chain disruptions. Yesterday's lower export numbers from China were disappointing, but expected. Remember, those are backward-looking numbers that encompassed the lockdowns. The numbers we'll be receiving next month, and beyond, will be based on the lockdowns being loosened (or lifted), which should reflect strong economic activity, including strong exports once again.

And of course, traders will be focused on our markets, and if they can regroup, and try and extend their gains from the last 2 weeks.

If the favorable seasonal tendencies are any indication, the odds are good that they can, as Q4 is typically the best quarter for stocks, and the post-midterm effect on the market is positive as well (since 1950, stocks have always gone up in the year after midterms, with an average 12-month forward return of 18.6%).

Let's also not forget that valuations are cheap. In fact, they are at multiyear lows.

And that's one of the reasons why some believe that value investing is back and is the next big opportunity. To read more about this, be sure to check out our latest commentary...

The Golden Era of Value Investing is Back


Kevin Matras

Executive Vice President, Zacks Investment Research


Zacks' Top "Buffett Stocks" for Today's Market

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See Zacks' latest value recommendations >>

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