Today, Wednesday May 4, 2022, the stock market went from down-to-up as Federal Reserve announced it will raise interest rates 0.50%. That’s the biggest ont-time increase since 2000.
Investors liked the comment from Fed Reserve Chairman Jerome Powell that 0.75% wasn’t something he was considering. Investors should expect more 0.50% hikes in the coming months.
The S&P 500 rose 3.0% on the day while the NASDAQ composite increased 3.2%.
Leaders on the day included Paycom Software (PAYC) which jumped 14% to $328 after the company beat the street the day before (profits in earnings per share or EPS):
- Reported: $1.90 vs. $1.47 = +29%
- Estimates: $1.75 vs. $1.47 = +19%
- Revenue: +30%
Stock Market Outlook
The stock market is looking to make a rally — and perhaps start a new Bull Market. 88% of the stocks on the New York Stock Exchange were up today. Another +80% day tomorrow could be a good signal that we’re at a bottom.
Also, the market is set up for a follow through day, which would officially put the stock market into an uptrend. A strong up day in he next week — without a big selloff — would be the signal we are looking for to buy more stocks.
Chart of the Day
Our chart of the day is this ten-year beauty of Paycom Software. Note this chart is from last qtr.
Paycom Software offers a complete cloud-based HR program for small and medium sizes businesses (50-10,000 employees) that human resource personnel can log into online to process payroll and benefits for employees. A tight labor market like we are in is positive for payroll companies.
Paycom used to be a “rapid grower”, which in my eyes is a company growing profits at 65% a year or more. Now, I think this is a 30%-35% grower.
I’m impressed with Paycom’s stock buyback plan. From 2016-2021 management bought back $488 million in stock. Last qtr, the company has $278 million in cash and $29 million in debt.
I’ve owned PAYC for clients since November 2016 when I bought in ~$43.
Higher interest rates also help profits, as the company holds payroll funds for 2-3 days before checks are delivered, in addition to holding client taxes that are set to be paid.
