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“Zeroing in on the best sectors or the best regions of the world is great, but zeroing in on the very best individual stocks is the key to making truly impressive profits.” – Lou Navellier

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Below is a link to our recent appearance on Lou Navellier’s show — Market Buzz — where we had a nice conversation about stocks!  Please watch when you have a chance.

It’s not a good day to be a bull this morning as S&P 500 futures are down about 0.50%. It was a steady move lower right up until around about 6:30 AM Eastern when there was some stabilization and even a modest bounce.

There’s not much in the way of catalysts driving the market weakness, but yields are higher as the 30-year treasury ticks up above 5% while the 10-year yield jumps back above 4.5%. As Republicans look to pass the Big Beautiful Bill, there has been some headway made in the SALT Cap negotiations with Speaker Johnson confirming that the cap will be lifted to $40,000, and the deficit implications of that agreement could be helping to drive the move higher in yields.

The economic calendar is light once again today, and in terms of earnings reports, since the close yesterday, some of the more notable reports have come from Palo Alto (PANW), Toll Brothers (TOL), Lowe’s (LOW), and Target (TGT).

After missing EPS forecasts yesterday, Home Depot (HD) broke a streak of 19 straight quarters of exceeding bottom-line forecasts, which was the longest streak of EPS beats for the stock since at least 2001. This morning, HD’s largest competitor, Lowe’s (LOW), reported earnings, and unlike HD, it was able to beat EPS forecast and extended its record streak of EPS beats to 24. That’s six years!

The chart below shows historical streaks of EPS beats for both stocks, and while they’re in identical industries, their streaks of earnings beats haven’t followed the same trajectories. While the current period has seen a longer streak of EPS beats for LOW, over the last 20+ years, HD has done a better job of managing expectations and then beating them, as evidenced by the fact that it has seen several more extended streaks of EPS beats than LOW.

Just because both stocks have done a good job of beating EPS forecasts over the last five years, doesn’t mean it has translated into their stock prices. While both stocks are higher now than they were five years ago, they have both been dead money for the last 3+ years. Coming out of the COVID lows, both stocks rallied sharply through late 2021, but then as the Fed started talking about rate hikes, they cratered and have been trading sideways ever since. While LOW’s managed to make a new high late last year, it has pulled back since then and is back below its 2021 high.

The culprit behind the relative weakness in both stocks has been rising interest rates. The chart below shows the 10-year yield since the start of 2020, and the peak in both stocks came right before the 10-year yield started to surge in early 2022. While yields have essentially been sideways for the last 2+ years, until yields start to move lower, it will be hard for both home-improvement stocks to move higher. Think of it as a scale. For one side to go up, the other has to go down.