Previous week was the best once since November 2020 for stocks, as buy-the-dip investors piled into stocks after the market started the week from an oversold position. This week’s big move came even after the Federal Reserve raised its benchmark rate for the first time since 2018, as the Fed move was widely expected, which helped embolden bullish sentiment. Investors also weighed a denial that China is considering support for Russia and mixed signals from peace talks between Russia and Ukraine. Technology shares led stock gains last week and teach heavy Nasdaq Composite surged a stunning 8.2%. The Dow Jones index jumped 5.5% and the S&P 500 spiked 6.1%. 


Top news last week:

  • Chinese stocks rocket higher after China signals support for the shares:    When the week started, JPMorgan Chase & Co. analysts warned that China’s internet stocks were “uninvestable.” The world is in a different place now.  Shares of Chinese companies listed publicly in the U.S. surged Wednesday as China signaled support for the stocks. Regulators from both countries are progressing toward a cooperation plan on U.S.-listed Chinese stocks, according to Chinese state media. The report cited a meeting Wednesday chaired by Vice Premier Liu He, who heads China’s finance committee. The Chinese government supports the listing of companies overseas and said its crackdown on technology companies should end soon, the state media report said. This could become a “bull driver” for a spring rally according to Bank of America  team.  Some of the Chinese stocks that showed great results during the last week include: Alibaba (+37.05%), JD.com (+51.47%), Baidu (+38.45%), NIO (+38.24%) , Li auto(+40.60%) and Xpeng (+38.78%).
  • Cash-Rich companies might gain from raising rates:  Fed raised its short-term lending rate by 25 basis points on Wednesday. It was the first rate hike by the Fed since 2018 and policymakers also released an updated economic forecast, which showed they are expecting to raise rates seven times in 2022, according to the median projection. In terms of raising rates and tighter monetary policies companies with enormous cash reserves will be the ones who should be benefiting the most. Raising rates will not only guarantee that the companies are earning more on their cash, but they will also be positioned better to pursue expansion and acquisition opportunities, compared to their competitors, who will now need to pay much higher rates to finance such corporate actions. According to article on Barron’s there are 3 such companies, that are seating on huge piles of cash: Berkshire Hathaway, that had $144 billion of cash and equivalents at the end of 2021, Apple,  that had $203 billion of cash and equivalents at year-end 2021, and Alphabet, that was sitting on $139 billion. Apple could be earning $4 billion more on its cash by 2023 and Alphabet nearly $3 billion. Higher interest income could boost Apple’s net income by about 3% next year, and Alphabet’s earnings may get a 4% lift.  Berkshire could be earning $3 billion annually on its cash by the end of this year against an estimated $150 million in 2021 given that the company keeps the bulk of its cash in super-safe Treasury bills, which yielded around 0.1% during 2021.
  • Food Costs are rising, Can investor benefit from that?: The highest inflation in decades is hitting consumers and rippling through the food industry, from farm equipment to packaged food, grocers, and restaurants. Russia’s invasion of Ukraine, adds additional pressure on rising food costs, as it threatens a significant portion of the world’s food supply when prices were already at their highest level in years. The two countries are among the globe’s top grain exporters, according to the Harvard Growth Lab’s Atlas of Economic Complexity, making up a combined 26% and 20% of global wheat and barley exports in 2019, respectively.  U.S. farmers are already profiting, with corn up over 35% in the past year. Wheat has been an even bigger winner, up more than 60% in the past 12 months. Investors who believe that prices of Corn and Wheat can go even higher might take advantage of the Instruments, such as:  Teucrium Corn Fund (Ticker: CORN) and Teucrium Wheat Fund (Ticker: Wheat).  As farmers do well, so does Deere, the dominant maker of farm equipment. Deere & Company (Ticker: DE) is already up more than 18% YTD.  AGCO Corporation is another stock from the same industry but has just 10th of the market value of Deere and is a pure play on farm equipment. Its shares, at about $132, trade at a big discount to Deere at 11 times projected 2022 earnings. Agco gets more than half of its sales in Europe, while Deere gets 50% in the U.S. 

Top S&P 500 sectors last week:

  • Consumer discretionary sector + 9.27% (ETF: XLY) 
  • Information Technology sector + 7.87% (ETF: XLK)
  • Financial sector + 7.14% (ETF: XLF)
     


Earnings this week:

Monday, March 21: Nike (NKE) and Tencent Music Entertainment (TME).

Tuesday, March 22: Carnival (CCL), Adobe (ADBE) and Poshmark (POSH).

Wednesday, March 23: General Mills (GIS), Winnebago (WGO), EVgo (EVGO) and Trip.com (TCOM).

Thursday, March 24: Darden Restaurants (DRI) and Nio (NIO).

Friday, March 25: JinkoSolar (JKS).