There is probably a generational divide between myself and readers, so I am under no grand illusion that rock band Korn's classic tune "Blind" is a personal favorite on Pandora.
One lyric from that head-banging tune that appropriately fits this week for the markets: "Are you ready?"
The Fed meeting's outcome, to be shared on Wednesday, will go a long way to either alleviating the market's growing list of concerns, or fanning the flames of a brutal selloff into April. It's that black and white, friends. And let me tell you this right now -- there are more important things the Fed will detail in its statement than removing, or keeping, the word "patient."
Everything you have been ingesting in the news regarding that single word put in place by Fed Chair Janet Yellen months ago is basically indicative of folks not understanding the Fed, not doing enough research and being under tight filing deadlines. For example, I would argue that the Fed's opening paragraph on the economy is as important as seeing that endearing word "patient." Investors have been forced to digest a rising number of sales warnings from major corporations like Intel (INTC), disappointing retail sales, sluggish manufacturing reads and softening consumer confidence, so if the Fed downgrades its view on the economy, yet keeps the word "patient," what does that really say about the state of the U.S. economy into the spring? Sure, stocks would likely rally on this scenario, as it would be seen as no rate hikes until 2016, but, wow, can't we as a country get off the drug that is uber-low interest rates?
But let's say for argument's sake the Fed removes the "patient" language, which investors are freaking out over. There are at least five things you would want to see in markets in order to make stocks buyable after recent nauseating gyrations. They include:
1. The U.S. dollar stabilizes as an indicator the markets have adjusted to the first two rate hikes. Yes, that is first two rate hikes, as once the Fed starts hiking rates, it's unlikely to stop barring a material slowdown in the economy and labor markets, and falling consumer prices. I think this is what you are seeing in the significant strength in the dollar.
2. Shares of multinational stocks like Coca-Cola (KO), Intel, etc. trade higher as the dollar stabilizes, suggesting the second-half earnings for these companies will be noticeably better than the first half. And that is not priced into valuations.
3. S&P 500 and Dow earnings reductions among Wall Street firms, driven mostly by the strong dollar, stabilize in the weeks leading up to first-quarter earnings season. Stocks, in the process, would no longer react harshly to the downward revisions.
4. Excessively valued tech stocks like Tesla (TSLA), Facebook (FB) and Twitter (TWTR) don't fall off a cliff in the days following the FOMC's decision. Remember, these are names that have thrived on cheap credit sloshing around the financial system -- it would be nice to see that, as rate hikes get going, these names hold tight.
5. The Dow transports, which have been underperforming the Dow and S&P 500 since the start of the year, begin to outperform. It would signal the economy could handle the Fed's gradual approach to rate increases.
Krispy Kreme (KKD)
One thing that happens as your Twitter following increases are messages at all sorts of random times. So, at 3 a.m. ET on Sunday I got asked if shares of Krispy Kreme were attractive after the earnings-related selloff last week. I didn't reply, never give stock tips on Twitter, just a personal rule.
Here is the deal. The market may have gotten ahead of itself a bit with the estimates, but the quarter on a stand-alone basis looked rather tight. Krispy Kreme, amid outcries by people to fast-food companies to use antibiotic-free chicken and beef, organic veggies, and remove sugar and salt content, dished out nice sales growth. In fact, they delivered the gains despite pulling back on margin-crushing promotions. You always want to see that from a retail/restaurant outfit, especially when it's swimming against a tide of people wanting to eat healthier.
I like the company's positioning, it continues to bring out new products (see that bacon doughnut hoopla) and not over-innovate, which would jack up costs. Sugar prices are way down. And I like how other competitors in the sector have no desire to sell Krispy Kreme-type indulgent treats. Starbucks (SBUX) is focusing on breakfast sandwiches and shareable evening plates. Dunkin' Donuts (DNKN) has added steak sandwiches to its menu, and will tend to introduce a limited-time doughnut here or there, usually related to a holiday. McDonald's (MCD) is flopping around, and unlikely will be adding doughnuts to its menu in our lifetime. And the doughnuts being sold at Sheetz and other convenience stores are not of the same Krispy Kreme quality.
Foot Locker (FL)
I have been a consistent champion of this stock over the past two years. Bottom line is that the company is winning because of the massive innovation wars going on among Nike (NKE), Under Armour (UA), Adidas and even Reebok. I have no idea what would derail the stock because I have no idea what would derail the fundamentals other than a recession, especially as rival Finish Line (FINL) is struggling.
I will be attending Foot Locker's investor day this afternoon. Keep an eye on my Twitter feed for updates @BrianSozzi.
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