Stocks rallied on Friday, but it was not enough to make up for losses from earlier in the week as the market processed another aggressive Fed rate hike. The Dow broke a four-week winning streak with a loss of 1.4%, while the S&P and the Nasdaq lost 3.3% and 5.6%, respectively.  

Investors looking for hints of Fed dovishness were disappointed on Wednesday to find no indication that the Fed may be poised to pause its tightening campaign. Fed Chair Jerome Powell said that the central bank still has “some ways to go” before the current rate hike cycle is over, noting that “incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”

Labor data released on Friday further fueled concerns that the Fed will push the economy into a recession with its aggressive stance in the battle against inflation. This morning’s payrolls release showed 261,000 jobs were added in October, surpassing the expectations of 205,000 additions. 

Market watchers will be focused on inflation in the days ahead and how it has been affecting consumer confidence. The October CPI inflation report is due on Thursday, followed by the preliminary November reading of the University of Michigan’s Consumer Sentiment Index (MCSI) on Friday.  

This week will be quiet on the earnings front, as nearly 85% of S&P 500 companies have already reported earnings. Companies scheduled to report include AstraZeneca, BioNTech, The Walt Disney Company, Activision Blizzard, DuPont, and Norwegian Cruise Line. According to FactSet data, leaving the 139% jump in energy earnings, companies across the S&P 500 would be reporting a year-over-year 5% decline in profits. 

Last week, the average rate on a 30-year fixed-rate mortgage surged to 7.23% – the highest level since 2002. Mortgage rates have more than doubled since the start of the year when the average 30-year mortgage stood at 3.11%. Our first recommendation will appeal to anyone looking to benefit from astronomical borrowing rates.  

As the Fed’s hawkish monetary policy has caused short-term borrowing rates to soar, things couldn’t get much worse for mortgage REITs. However, for those with longer-term sights, AGNC Investment (AGNC) seems appealing. The REIT should benefit from higher interest rates over time. While Fed policy has raised short-term borrowing costs, it’s also boosting the yields on the mortgage-backed securities AGNC is stocking up on.  

AGNC boasts a robust and well-safeguarded portfolio. Based on preliminary third-quarter results from the company, it ended September with an investment portfolio totaling $61.5 billion, of which only $1.7 billion was credit-risk transfer assets. Almost the entire portfolio is composed of agency assets, which the federal government protects in the event of default. There’s quite a bit of safety built into AGNC’s supercharged 18% yield. AGNC pays its dividend monthly and has averaged double a digit yield in 12 of the past 13 years.    

The consensus expects the REIT to post quarterly earnings of $0.71 per share in its October 24th report, representing a year-over-year decline of 5.3%. The consensus EPS estimate has increased by 12% over the past month leading up to the call. Revenues are expected to be $289.1 million, down 34.7% from the year-ago quarter.

The decline in tech may be offering investors what many would consider a once-in-a-lifetime opportunity in some notable names. Our first recommendation for this week is one such company with many positive attributes, including a deep economic moat, high operating margins, and a strong balance sheet to boot.

Google parent Alphabet (GOOG, GOOGL) recently dipped below $100 after its recent 20-for-1 stock split. At its lowest level in over a decade, the stock is more accessible for investors, which should help when enthusiasm for big tech stocks re-accelerates.   

Over the last five years, GOOGL is up 101%, crushing the Nasdaq’s 64% gain and the Internet Services Market’s 72% gain over the same period. The company posted earnings per share of $1.21 on revenue that grew by 12.6% year-over-year to $69.69 billion. The consensus sees earnings dropping 7% in 2022 but rising in 2023 at $5.80 a share. Top-line growth is expected, with 2022 sales expected to climb 11% and another 10% in 2023 to $260.44 billion.

Key catalysts to watch out for include its artificial intelligence tools that help users search in new ways, such as Google Lens, which is currently being used over 8 billion times a month.   Google also recently introduced a new multi-search feature to help users search with both words and images simultaneously. Shares also have a strong rebound potential once the digital ad market recovers.   

At 19 times forward earnings, Alphabet shares are trading in line with the S&P 500. Still, the current earnings multiple may underestimate the company’s potential to re-accelerate earnings once its many growth catalysts start to play out.

For advertising to make an impact, ads must be seen, by a real person,  in the intended geography, in a brand-safe environment. Challenges like the latest fraud schemes have led to increasingly stringent criteria for ads and heightened risk to the company’s brand reputation. Our first recommendation is an industry leader in digital advertising solutions that’s gaining attention on Wall Street.  

Advertisers seeking stability and clarity in an increasingly unstable and opaque marketing environment are turning to DoubleVerify (DV) for its industry-leading quality and performance solutions. DV’s products automatically analyze the effectiveness of digital ads. Among the metrics evaluated by the software are “brand safety, viewability, and geography,” along with “exposure and engagement” potential, giving customers clarity and confidence in their digital investments, ultimately driving better outcomes and ROI.   

The company’s impressive customer base includes Meta (META), Amazon’s (AMZN), Twitch Ads, and Microsoft (MSFT). There have also been recent rumblings on Wall Street that Double Verify has partnered up with Netflix (NFLX) for its upcoming ad offering.

Total advertiser revenue grew by 43% YOY in the second quarter to $110 million. It generated a net income of $10.3 million primarily due to a 24% increase in Media Transactions Measured and a 10% increase in Measured Transaction Fees. The Gross Revenue Retention rate was over 95%. “We delivered an outstanding second quarter and surpassed our expectations for growth and profitability fueled by record Activation revenue and continued momentum on Social and CTV platforms,” said CEO Mark Zagorski.

DoubleVerify anticipates third-quarter revenue of $108 to $110 million, representing a year-over-year increase of 31%, and Adjusted EBITDA in the range of $32 to $34 million, representing a 30% margin. Full Year 2022 Revenue of $448 to $450 million represents a year-over-year increase of 35%. We’ll find out if the company has sustained its impressive growth momentum during its  November 11th earnings call.  

Stocks ticked higher to close the week, but it was not enough to make up for earlier losses as the market processed another aggressive Fed rate hike. The major averages notched 1% gains on Friday but finished lower for the week. The Dow broke a four-week winning streak with a loss of 2.5%, while the S&P and the Nasdaq lost 4.5% and 6.1%, respectively.  

Investors looking for hints of Fed dovishness were disappointed on Wednesday to find no indication that the Fed may be poised to pause its tightening campaign. Fed Chair Jerome Powell said that the central bank still has “some ways to go” before the current rate hike cycle is over, noting that “incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.”

Labor data released this morning further fueled concerns that the Fed will push the economy into a recession with its aggressive stance in the battle against inflation. This morning’s payrolls release showed 261,000 jobs were added in October, surpassing the expectations of 205,000 additions. 

After another rough week, here are two recommendations of stocks to buy and one stock to stay away from.

37 U.S. states and four U.S. territories have laws that permit the use of marijuana. While it is still  illegal on a Federal level, President Biden’s proclamation on October 7th included a request for the attorney general “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law.”  Many see this as a major step in the right direction, but it’s expected to be a slow road.    

The potential legalization of cannabis is likely to be a significant positive catalyst for the leader in net cannabis revenue, Tilray (TLRY). The company has a presence in all key markets, with a focus on recreational and medicinal cannabis; the addressable market is significant and expanding. 

Following the recent Whitehouse announcement, TLRY surged 22% but gave back some gains when the company reported Q1 2023 revenue and EPS misses. The company has its sights set on Revenue of $4 billion by 2024, a realistic target if regulatory hurdles wane. At $3.17 per share, TLRY currently trades at -8.5x forward earnings.   The stock remains deeply oversold and is worth buying even after the recent uptick.

Global healthcare leader Eli Lilly And Company (LLY) has been creating high-quality medicines for more than a century. The drug firm focuses on endocrinology, oncology, neuroscience, and immunology. Key products include Trulicity, Jardiance, Humalog, and Humulin for diabetes; and Taltz and Olumiant for immunology; and Verzenio and Alimta for cancer.  

The mega-cap pharmaceutical giant’s pipeline is locked and loaded with promising advancements, which means plenty of upcoming potential opportunities for investors to benefit from. In the first half of 2022, Lilly received word that the FDA was fast-tracking its investigation of tirzepatide. A drug designed to treat adults who are overweight with weight-related comorbidities such as diabetes. Eli Lilly expects its rolling application to be completed by April 2023.

JPMorgan analyst Chris Schott recently summed up his bullish outlook on LLY. The analyst believes that Eli Lilly remains the best-positioned growth story in his coverage and one of his top picks following the stock’s pullback over the past month. The analyst sees a “significant opportunity” for Tirzepadite in type 2 diabetes and obesity, which in his view, “warrants increased attention.”  Schott currently gives the stock an Overweight rating and a $300 price target.  

Lilly’s share price is up nearly 20% this year and seems likely to continue to gain steam into the new year. The stock sports a dividend of $0.98 or 1.21% annually. LLY’s dividend payout for the year is set for the low 40% range, which should allow for robust future dividend growth.

A strong pipeline and a stable dividend make Eli Lilly an attractive consideration. The pros on Wall Street also think so. Among 17 polled analysts, 14 say to Buy LLY, 2 call it a Hold, and only 1 rates the stock a Sell. A median 12-month price target of $351 represents a 9% increase from its current price.

Rising interest rates and a cooling off of the red-hot housing market create a challenging backdrop for mortgage provider Rocket Companies (RKT). The average rate on a 30-year fixed-rate mortgage surged to nearly 7% last week, its highest level in over 20 years, according to Freddie Mac. Mortgage rates have more than doubled since the start of the year when the average 30-year mortgage stood at 3.11%. Furthermore, the Mortgage Bankers Association recently reported that mortgage application volume is down 37% year-over-year. This situation won’t likely resolve anytime soon as the Federal Reserve isn’t signaling a near-term slowdown in monetary policy tightening.

Rocket has struggled to meet expectations for the past few quarters as it laps 2021’s blockbuster numbers. Most recently, the company came out with adjusted quarterly earnings of -$0.03 per share, missing the consensus estimate of $0.02 per share. This compares to earnings of $0.46 per share a year ago. Revenue was reported as $1.44B, down nearly 48% from the same period last year and 26% lower than the consensus estimate.  

Rocket’s been underperforming the broader market so far in 2022. RKT shares have lost about 55% since the beginning of the year versus the S&P 500’s decline of 20%. The pros on Wall Street say to Hold RKT. Of 16 analysts offering recommendations, 2 rate the stock a Buy, 12 rate it a Hold, and 2 say to Sell RKT shares.