The retail sales report was released Wednesday morning. Investors are focusing on the Fed announcement Wednesday afternoon. Software companies are getting downgraded as analysts readjust valuations for inflation and higher interest rates.
Stock index futures were mostly flat before the open as investors await the Fed announcement this afternoon. The Census Bureau retail sales reports found that sales grew at a much slower pace in November despite rising prices inflating the numbers. However, stock index futures were unmoved on the report and the VIX (Cboe Volatility Index) remained slightly elevated before the open. Apparently, all eyes are on the Fed. As investors focus on the Fed, it’s likely that volumes will be light in the morning. Light volumes carry the risk of not getting orders filled at a desirable price. Traders should consider waiting until after the meeting before placing trades or scaling into their positions to limit their risk. The reaction to the announcement will depend on how hawkish the Fed is with its need to taper faster and raise rates. Outside of the Fed watch, everyone appears to be losing a little in the streaming wars. Netflix NFLX (NFLX) was downgraded Wednesday morning by Deutsche Bank. The analysts said it was hard to justify the company’s valuation because its revenue growth is slowing. However, the stock was unchanged in premarket trading. Additionally, yesterday, Morgan Stanley MS cut their price target on Disney DIS (DIS) to $185 from $210. Despite the popularity of electric vehicle (EV) makers, lithium producers Albemarle ALB (ALB) and Livent (LTHM) were downgraded by Goldman Sachs GS on Wednesday morning from “neutral” to “sell”. EV batteries are lithium batteries, so there should be high demand for lithium so the downgrade may come as a bit of surprise for these companies. The stocks fell 4.96% and 7.80% respectively in premarket trading. Citi analysts see the supply chain clearing up, which prompted them to upgraded United Parcel Service UPS (UPS). UPS rallied 1.27% in premarket trading. Stocks fell on Tuesday but trimmed some of its losses going into the close. The tech-heavy Nasdaq NDAQ Composite (COMP: GIDS) was the biggest loser among the major indices on Tuesday. The index fell more than 2% but rallied off its lows to close 1.14% lower. The Nasdaq was drug down by the technology sector, which was the worst sector on the day. By contrast, the Dow Jones Industrial Average ($DJI) was down just 0.3% because it was buoyed by financial stocks, which rose on a pop in interest rates. The software industry group was a big drag on technology stocks which, were the worst performer on the day. The Dow Jones U.S. Software Index ($DWCSOF) fell 3.28% after JP Morgan software analyst Sterling Auty issued a slew of stock downgrades and price target cuts that included companies like Adobe ADBE (ADBE), Akamai (AKAM), Cadence (CDNS), Cloudflare NET (NET), LegalZoom (LZ), and more.
