VIDEO: We’re Looking for Opportunity Amid the Market Selloff

In today’s Daily Rundown video, Chris Versace explains why the TheStreet Pro Portfolio will keep a glass-half-full view as we go through another market pullback, the fifth one in the last year.

He explains why we’ll be watching key support levels for the S&P 500 as we get the December PPI and CPI reports and big bank earnings, including those from Bank of America BAC and Morgan Stanley MS.

We also see a big week for retailers and restaurant companies, and what we learn should lead to Amazon AMZN and Costco COST coming out on top.

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here. Monday, January 13. You probably noticed stocks are moving lower out of the gate as we begin the first full week of trading in the new year. Hard to believe, but, yes, this is the first full week of trading that we have in 2025. And as we discussed in Friday's roundup, we are closely watching the S&P 500 on a few fronts, including its 100 day moving average near 5820.

It's flirting with it and we could very well see it move below that level. If we see that, the next potential stop for the S&P 500 is near 5572, better known as the 200 day moving average. Now, as we discussed in Friday's roundup, if we do see the S&P 500 retreat to that level, it would be about an 8 and 1/2% pullback from its recent peak.

Now, I know a lot of folks are freaking out, wondering, oh, what's going to happen, this sort of thing. But let's just take a beat and remember that throughout the course of a year, we tend to see two to three 5% pullbacks and about, on average, one 10% pullback. The question that I pose is, is our glass half empty or is our glass half full?

Yes, inflation has been persistent, but the economy remains strong. We are continuing to see more people go to work earning real wages, meaning faster than inflation. Very good for consumer spending, a key avenue of the domestic economy. So from our perspective, yes, we may see the market pull back a little bit further, but as you know, we tend to view pullbacks like this, ones that we saw April of 2024, August of 2024, September, November as opportunities to pick up quality companies benefiting from multiyear tailwinds poised to deliver superior earnings growth at better prices.

So as we go through this, we are going to do what we do, stick to the fundamentals, be mindful of the technicals, both for the market and individual positions, and we're going to pick our spots. Now let's talk about some factors that could lead the market to move lower in the scenario that I just described. Well, this week it's a big one for inflation. Tomorrow, Tuesday, we get the December producer price index report. And then on Wednesday, the Consumer Price Index report.

Now my thinking is this, if the data comes in as expected or maybe even slightly warmer, it's going to reaffirm the market action that we saw last week. Remember, that was the big push out towards late 2025 for a potential Fed rate cut. But if those two pieces of inflation data come in like we saw last week with ISM's services PMI price component, and by that I mean hotter than expected. Remember that prices component in the ISM December services, PMI was the highest level we saw in over a year and well ahead of market expectations.

If we see that with the December's PPI and CPI, odds are we're going to see the market's expectations for rate cuts off the board for 2025, and that will weigh on the markets a little bit further, especially interest rate sensitive positions. And given the prospect for that, as you saw on Friday, we raised our cash levels. We want to make sure that as we navigate through this, we do have some ample firepower to be opportunistic if and when those opportunities present themselves.

Now, in addition to the inflation data this week, we also have the real start of the December quarter earnings season. Wednesday, Thursday, a rash of big banks. Yes, Thursday we have our own Bank of America, Morgan Stanley. And what we heard from Jefferies last week was very constructive. But on Wednesday, the day before, we will get quarterly results from JPMorgan, Citigroup, and Goldman Sachs. Those three firms will give us another update on investment banking activity and asset management asset gathering in the December quarter, but also they'll share their outlook for the current year.

They're also going to inform us about commercial banking as well. Now we will be digesting all of that, but I also think, particularly when it comes to Jamie Dimon at JPMorgan, but also it's Citi and Goldman Sachs. The market is going to want to hear its thoughts on the interest rate environment, what it means for net interest income in the coming year, the potential for tariffs, and the impact of both, candidly, on not only its business, but those for its customers and therefore the overall economy. And we will be putting ourselves into the camp of folks interested in those comments.

Also remember, too, that as these banks start to report, it's going to start to give us the first hard look at expected 2025 EPS growth for the S&P 500. The market consensus just shy of 15%. It's a big number, and I would not be surprised if companies seeing where interest rates are poised to be, the continued strength in the dollar, uncertainty in what might emerge from the White House in terms of policy, as well as tariffs, I wouldn't be surprised if companies take the opportunity to lower the bar.

If we see that, that's another factor that could pressure the market this week, perhaps early next week, as more companies report. This week, we also have another big, big week of conferences. Last week, Consumer Electronics Show. This week it's going to be the annual ICR conference, very retail restaurant heavy. And we also have the December retail sales report coming later this week. As we kick off with today, we are seeing some companies preannounce discussing the impact of holiday sales.

For example, Macy's came up short with its top line, sharing that it had flan-- flat, excuse me, comp sales. Papa John's system-wide sales in North America were down 4% during the quarter. First Watch was also down year over year, and I suspect that we're going to hear more announcements in this vein, some good, some not so good, as companies get ready to present at this conference. What I do suspect is that we are going to hear context, if you will, that will be very positive for our shares of Amazon and Costco in the portfolio.

However, given what's going on in the market, could this good news be overlooked? It certainly could be. But again, it's going to depend on what we hear, not only in the economic data, but when we hear from the half dozen or so Fed speakers that are making the rounds this week. Now, a few minutes ago, I mentioned that we updated our-- updated and increased our cash position late last week.

Today, we're going to be sharing an updated table of consensus EPS figures for our holdings, but also updated panic points and pick up points. That will be coming your way later today. Now, as we do that, I mentioned it a minute ago, but it bears repeating. we've seen a similar setup a few times earlier this year-- or sorry, last year, April, August, September, November. Just like then, we're going to aim to keep our cool, look for opportunities for the portfolio.

So as we navigate the coming days, please be sure to check your emails, your alerts. As we get this updated information, we'll be recasting our thinking as needed, and we want to make sure that you get it. And if we have to make any moves with the portfolio, we want to make sure that you are right there with us. Thanks for watching. It's a busy week. We'll get through it together.

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At the time of publication, TheStreet Pro Portfolio was long BAC, MS, AMZN and COST.