Topics riling the market include whether tariffs and

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topics riling the market include whether tariffs and trade policy will crimp trade; whether rising federal budget deficits will hurt business confidence; and whether the Mueller probe risks revealing something sufficiently unethical or illegal to threaten the President directly. After placid years in which bulls were firmly in command, the more equal footing between bulls and bears is churning up volatility in the market – and, predictably, leading to little to no net movement in stocks. Daily rate of change on the S&P 500 is an elevated 0.91% for the 2018 year to date, including 0.93% in March and 0.97% in April to date. Meanwhile, the S&P 500 has gone nowhere: it began the 4/23/18 trading week up 0.1% year to date. Amid all this turmoil, the big question is: where do stocks go from here? It is important to remember that stocks and the Fed are not the only players on the stage. In any environment, we regard earnings as the key market driver. S&P 500 earnings from continuing operations are poised to grow based on strong domestic economic fundamentals and an increasingly vibrant global economy. Other positives include competitive and repatriation benefits from weak dollar as well as lower tax costs related to the Tax Cut & Jobs Act. Put it all together, and S&P 500 constituent companies are poised for their best EPS growth for any period that is not an immediate-post-recession quarter. Argus continues to believe that exceptional earnings growth will supersede any near-term negative impact from rising rates as well as the other factors cited above. We will be mindful of the Fed’s policy actions. With all hikes well-telegraphed, we do not believe the Fed will give the stock market more than it can absorb. (Jim Kelleher, Director of Research)
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M ARKET D IGEST - 4 - CAPITAL ONE FINANCIAL CORP. (NYSE: COF, $92.76) ....................................................... BUY COF: Maintaining BUY following 1Q EPS * On April 24, Capital One reported adjusted 1Q18 earnings from continuing operations of $2.65 per share, up from $1.75 a year earlier and above the $2.31 consensus. * Credit card purchase volume was strong, up 18% from the prior year, and card loans increased, but growth in average loans decelerated to 3% in 1Q from 5% in 4Q. * Noting a more severe stress test environment in the 2018 CCAR process, management said that it would suspend share repurchases in 2Q in order to build additional capital. * We view COF as well positioned in the credit card space, and believe that the stock is favorably valued at less than 10-times our 2018 EPS estimate. ANALYSIS INVESTMENT THESIS We are maintaining our BUY rating on Capital One Financial Corp. (NYSE: COF). In 1Q18, the company benefited from better-than-expected credit trends and continued solid credit card lending growth and purchase volumes. However, management noted a more severe stress test environment in the 2018 CCAR process, and said that it would suspend share repurchases in the second quarter to build additional capital. (COF has been active in this area, buying back $200 million of its stock in 1Q.) Still,
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