7 Stocks to Buy Thanks to Trump’s New Trade Deal

October 1, 2018 William Roth

U.S. equities are moving powerfully higher on Monday, with the major large-cap indices testing recent record highs, after the United States reached a new trade deal with Mexico and Canada. Effectively “NAFTA 2.0”, the deal, which carries the moniker USMCA, will solve deficiencies in the original NAFTA deal and open new markets for U.S. farmers and manufacturers … at least according to President Trump.

Stocks are cheering the news, as it’s one of the first indications Trump’s aggressive trade tactics are starting to produce results instead of just escalation, as in the case with the ongoing tensions with China.

Investors are cheering the removal of a major source of policy uncertainty and are raising their hopes that previously imposed steel and aluminum tariffs will be rolled back to the benefit of manufacturers. As a result, a number of large-cap names are pushing to new highs. With that in mind, here are seven stocks to buy now:

Microsoft (MSFT)

Microsoft (MSFT) stocks to buy

Microsoft (NASDAQ:MSFT) shares are breaking out to a new record high, pushing away from the $115-a-share level and continuing a smooth and steady rise above their 50-day moving average going back to early April. The company has been enjoying a lift thanks to a dividend boost announced in late September, which included a rise from 42 cents per share to 46 cents per share. While this stock to buy isn’t directly impacted by the trade news, it’s enjoying the broad market tailwinds.

The company will next report results on Oct. 25. Analysts are looking for earnings of 96 cents per share on revenues of $27.7 billion. When the company last reported on July 19, earnings of $1.14 per share beat estimates by 6 cents on a 17.5% rise in revenues.

Caterpillar (CAT)

Caterpillar (CAT) stocks to buy

Heavy equipment manufacturer Caterpillar (NYSE:CAT) is at the epicenter of the ongoing trade disputes, as it is sensitive to both U.S. export activity as well as the price of steel and aluminum used to build its earthmovers and other machinery. Shares recently popped up and over their 200-day moving average, returning to a trading range last seen in June. Shares are also overcoming the negative impact of a downgrade from analysts at OTR Global on Sept. 21.

The company will next report results on Oct. 23, before the bell. Analysts are looking for earnings of $2.82 per share on revenues of $13.2 billion. When the company last reported on July 30, earnings of $2.97 cents per share beat estimates by 23 cents on a 23.7% rise in revenues.

Boeing (BA)

Boeing (BA) stocks to buy

Shares of Boeing (NYSE:BA) — one of America’s premier exporters, especially to China — are enjoying a 2.5% surge above triple-top resistance from February, and they are pushing to new record highs. This jump is coming after two tests of support at the 200-day moving average. The company’s order backlog continues to grow, as seen in BA’s announcement today of an order from United Airlines (NASDAQ:UAL) for nine 787 Dreamliners valued at $2.5 billion.

The company will next report results on Oct. 24, before the bell. Analysts are looking for earnings of $3.49 per share on revenues of $24.9 billion. When the company last reported on July 25, earnings of $3.33 per share beat estimates by 8 cents on a 5.2% rise in revenues.

Honeywell (HON)

Honeywell (HON) stocks to buy

Shares of Honeywell (NYSE:HON) are pushing to new highs, capping nearly a month-long consolidation range and resuming the uptrend that started in June. HON shares have experienced a total gain of nearly 20% so far. The company has many areas of exposure to trade and exports, acting as a supplier for BA and other aerospace companies as well as supplying products for home and building projects and advanced technologies like quantum computing.

The company will next report results on Oct. 19, before the bell. Analysts are looking for earnings of $1.99 per share on revenues of $10.7 billion. When the company last reported on July 20, earnings of $2.12 per share beat estimates by 11 cents on an 8.3% rise in revenues.

Danaher (DHR)

Danaher (DHR) stocks to buy

Danaher (NYSE:DHR) shares are extending their recent rise, pushing further away from the lows seen in late August for a move of roughly 10% so far. The company is a maker of medical and industrial products such as microscopes, filtration systems and purification solutions. The company has been a steady riser compared to some of the other companies on this list of stocks to buy, and it has risen without so much as a touch of its 200-week moving average since way back in 2010.

The company will next report results on Oct. 18, before the bell. Analysts are looking for earnings of $1.08 per share on revenues of $4.8 billion. When the company last reported on July 19, earnings of $1.15 per share beat estimates by 6 cents per share on a 10.4% rise in revenues.

Boston Scientific (BSX)

Boston Scientific (BSX) stocks to buy

Boston Scientific (NYSE:BSX) shares have been a steady gainers as well, extending a 50% rise off of their late March lows to push to new highs. Analysts at Needham raised their price target to $43 after the company announced an agreement to acquire Augmenix, a developer of a treatment to reduce side effects of men recovering from prostate cancer radiotherapy.

The company will next report results on Oct. 24, before the bell. Analysts are looking for earnings of 34 cents per share on revenues of $2.4 billion. When the company last reported on July 25, earnings of 41 cents per share beat estimates by 7 cents on a 10.3% rise in revenues.

Cisco (CSCO)

Cisco (CSCO) stocks to buy

Shares of Cisco (NASDAQ:CSCO) are inching up and over recent congestion between $48 and $49 a share. CSCO is benefiting from a price target upgrade from analysts at Piper Jaffray who are now looking for $53. The stock has been on the move since August when the company reported an acceleration of revenue growth pushing the share price to levels not seen since dot-com bubble.

The company will next report results on Nov. 14, after the close. Analysts are looking for earnings of 66 cents per share on revenues of $12.9 billion. When the company last reported on Aug. 15, earnings of 70 cents per share beat estimates by a penny on a 5.9% rise in revenues.

As of this writing, William Roth did not hold a position in any of the aforementioned securities.

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Gold Prices Are Following This Textbook Trend

October 1, 2018 Peter Krauth

The widely anticipated September Fed rate hike is now behind us.

And the market’s reaction, at least so far, has been right out of the textbook.

The dollar is up, and gold prices are down.

But we know what happens next…

Gold prices will start to rally.

The dollar is still showing signs of having peaked, and gold continues to suggest it’s building a base before rallying.

As it turns out, speculators have their biggest futures bets against gold in 17 years. The last time levels were similar was in 2001, and that’s when gold rallied by almost 300% in just over 24 months.

There’s no guarantee we’re at an interim bottom, but the signs are pointing toward those odds.

Let’s take a closer look at what happened to the price of gold last week, plus how the Fed is changing my latest gold price prediction…

Fed Rate Hikes Are Good for Gold Prices

The first half of last week brought more gold consolidation with the yellow metal moving within a tight $9 range.

The gold price action was all at the back end of the week, which is no surprise, given participants were waiting for confirmation of the Fed rate hike.

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They got it. As expected, gold prices dropped at the expense of the dollar’s gain.

Here’s what the U.S Dollar Index (DXY) did over the last five trading days…

Little real gains came on Wednesday (Sept. 26) after the Fed hike and press release. Gold prices ended at $1,194, which was the bottom of its recent trading range.

But on Thursday (Sept. 27), the euro dropped, pushing the DXY higher as concern over a possible delay for Italy’s budget proposal weighed on the currency. The dollar soared, taking the DXY to 95.3 by mid-morning, a 130-basis-point gain from Tuesday’s (Sept. 25) low.

Gold prices were beaten down on Thursday in the wake of euro weakness and a somewhat hawkish outlook from the Fed that rate hikes would continue into 2020.

But traders took dollar profits on Friday (Sept. 28) as the rate hike euphoria wore off. That pushed the DXY back to 95.10 by mid-afternoon, and gold rallied by $10 from $1,183 to $1,193 through the late morning and into the close.

Now, the textbook response from here is to see the start of the next gold price rally.

Here’s why – and how high you can expect gold prices to climb to…

My October Gold Price Forecast

With Friday’s close, the dollar index is back up to 95, which is about the level of the 50-day moving average.

But notice that the 50-day moving average (the blue line below) has recently dipped lower, suggesting the trend has indeed shifted downward.

As I had expected last week, we are getting a bounce in the DXY as it had approached oversold levels. But I still think weakness will soon return.

Tariffs and economic strength have boosted the greenback, but that’s only going to help for so long. As other nations wean themselves off pricey American imports, the United States will feel the impact. Trump adamantly wants a weaker dollar and talks it down at every opportunity to help favor U.S. exports.

Here are a few interesting charts for gold and gold stocks.

Given Friday’s bounce, which doesn’t show on this chart, we could be looking at a double bottom in gold prices if it holds.

As for gold stocks, they’ve shown more relative strength than gold itself.

More interesting is recent action in the Gold Miners Bullish Percent Index ($BPGDM).

When the index turns up from oversold levels (typically below 30), we get a buy signal. If there is solid follow-through, we could be looking at strong gains in gold stocks over the next couple of months.

If we get a gold rally abetted by renewed dollar weakness, then look for gold to quickly cross the $1,210 level (50-day moving average). I’d then expect a push higher to the $1,230 to $1,240 range.

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Market Preview

Market Preview: Market Rallies on New USMCA Deal, Earnings from Pepsi and Paychex

October 1, 2018 Steven Adams

The announcement that the U.S. and Canada had reached a trade agreement sent the DJIA and S&P 500 higher Monday. The new United States-Mexico-Canada Agreement or USMCA must be approved by Congress before it goes into effect. The rally in U.S. markets appeared to be more of a relief rally that there is finally some certainty on trade in North America than a celebration of the deal. Traders hope the closing of this deal portends a shorter trade war with China, and perhaps an agreement with the EU. But while announcing the new USMCA in the Rose Garden, President Trump threw cold water on restarting U.S./China talks by saying it was “too early to talk” trade with China at this point. The President presumably wants to give the new tariffs a chance to have an impact before reopening negotiations.

Pepsico (PEP) reports earnings Tuesday. The beverage and snack company has been losing ground in North America, and covering with gains internationally for several quarters. The recent announcement that the company would be acquiring SodaStream (SODA) my staunch some of the erosion in North America, but short term the acquisition will likely add integration costs. Paychex (PAYX) also reports earnings Tuesday morning. After hitting lows in April, the payroll company has risen almost 30%, but earnings estimates have been falling the last few months. As with many of the financial stocks, the company may be feeling the effect of competition from upstart FinTechs more nimble than the $26 billion giant.

In economic news, Tuesday morning the Redbook retail numbers will be released along with motor vehicle sales. Following close on the heels of the trade deal, and with GM no longer providing numbers for the report, the auto numbers may need to come with a user guide this time around. Fed Chairman Powell will deliver a speech at 12pm on Tuesday, but it’s highly likely no new information will come out of the talk given the recency of the Fed announcement last week. Wednesday MBA mortgage applications, the ADP Employment Report, services PMI, and the ISM Non-Manufacturing Index will all be released. Consensus puts the employment number at 179,000 jobs created in September.

Supplementing the mortgage application numbers Wednesday morning will be earnings from Lennar (LEN). The home builder’s stock has plummeted this year. Investors are anxiously awaiting the company’s forecast and how rising interest rates will impact their business heading into 2019. An update on the merger progress with Calatlantic Homes will likely also be on tap. RPM International (RPM) has enjoyed a nice rally the second half of the year. The international sealant and coating company has been restructuring and cutting costs, which has pleased investors. To continue the move up, the company will need to paint a picture of growth in the year ahead, which may not be forthcoming on Wednesday.

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Daily Archives: October 1, 2018