The Fed pledges to continue fighting inflation
Broader US market averages fell more than 3% across the board on Friday, following hawkish comments from the Federal Reserve. Information technology stocks led the way lower last week, while the energy sector rebounded.
At the Jackson Hole annual conference on Friday, Fed Chairman Jerome Powell suggested that interest rates are likely to stay higher for longer. Fed funds futures forecast an 85% chance that rates will be 125 to 150 basis points higher by the end of the year.
Elsewhere, preliminary US Purchasing Managers’ Index (PMI) data for August on Tuesday suggested a drop in economic activity this month. The reading of 44.1 in the services sector stood out as it signaled an economic contraction.
The week ahead
Best buy (BBY) and CV (HPQ) are expected to release their quarterly results on Tuesday, followed by Broadcom (AVGO) on Thursday. Trading volume could be relatively light next week ahead of a holiday weekend.
On the economic front, August consumer confidence will be released on Tuesday. The Institute for Supply Management (ISM) will also release August data for the manufacturing sector on Thursday.
Friday brings the August jobs report. Economists forecast adding 285,000 non-farm jobs and maintaining the overall unemployment rate at 3.5%.
With slowing growth prospects and the prospect of higher interest rates, realizing investment gains in 2022 could become difficult. Therefore, deciding what and when to buy can be difficult for any investor. However, the fact remains that investments with upside potential and other positive signals are there if you dig a little deeper. One of these product names deserves a closer look and is our stock of the week.
Action of the week: Teck Resources (TEAK)
The company extracts coal, copper, zinc and other raw materials for the steel industry. The stock gained almost 7% last week. It is showing signs that it has the potential to continue this outperformance in the final months of 2022. Here’s why:
We view Teck as a natural hedge against rising inflationary pressures. Its growth was evident last month when management reported a quarterly increase in revenue of 126% from a year ago, beating consensus expectations.
The company said it faced higher costs during COVID-19 but still generated record cash flow during the period. As a result, management repurchased $572 million in stock during the quarter and repaid $650 million in debt.
Despite the strong results, Teck is currently valued at just 7.9 times expected earnings over the next four quarters, which is a steep discount to the broader market.
In the meantime, the company displays an “Outperform” Smart Score of 10/10 on TipRanks. This data-driven stock score is based on 8 key market factors.
In addition to the positives already mentioned, the Smart Score indicates that stocks have seen improved sentiment from analysts, hedge funds and financial bloggers.
FYI: This is just one of 20 stocks selected for the Smart Investor Portfolio, a weekly newsletter that combines big data and market insights.