Penny stocks hold a unique allure. Even on days when the broader stock market is in decline, such as today, there’s often a selection of these low-priced stocks surging upwards. Trading in these inexpensive stocks comes with substantial risk. However, the potential rewards can be equally impressive, with profits sometimes reaching three or four times the initial investment. Is this a common occurrence?

Not typically, but the chances of discovering penny stocks that have risen by 40%, 50%, or even 100% in a single day have been notably frequent recently. Although general market trends don’t often have a strong impact on the sentiment towards these low-cost stocks, understanding the forces shaping the broader market’s direction can be beneficial.

Understanding Today’s Stock Market Decline

Several factors are contributing to the stock market’s downturn today. One major influence is the Federal Reserve’s monetary policy, which is approaching the end of its tightening phase. Some experts believe that the elevated inflation rates from the previous year will begin to diminish. Additionally, there’s growing speculation that the recent interest rate increase might be the last, though the possibility of another hike is not entirely dismissed.

The Role of Second-Quarter Earnings

Another element affecting the market is the performance of second-quarter earnings. As the earnings season reaches its tail end, current forecasts point to a decrease. Earnings are predicted to drop by 6.8% compared to the previous year, with revenues expected to decline by 0.6%.

These projections are based on the combined growth rate and data from Refinitiv. Over 70% of companies have exceeded earnings expectations, and a majority have surpassed revenue estimates. Nevertheless, the overall reduction in earnings and revenues is likely a contributing factor to the market’s slump.

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Economic Data and Market Volatility

Economic indicators also have a bearing on market behavior. The U.S. economy expanded by 2.4% in the second quarter, outpacing forecasts. However, this encouraging news was probably overshadowed by apprehensions regarding the Federal Reserve’s monetary strategy and the general decrease in second-quarter earnings.

Lastly, the market’s turbulence is being fueled by earnings reports, leading to significant fluctuations in numerous stocks on Wall Street today. The exciting part is that even in the face of the stock market down today, the world of penny stocks offers both thrilling opportunities and inherent risks.

Understanding the broader market trends, including factors like monetary policy, earnings performance, economic data, and market volatility, can provide valuable context for those looking to navigate the often unpredictable landscape of low-cost stocks. Whether seeking quick gains or cautious investments, knowledge of these dynamics can equip investors to make more informed decisions to identify penny stocks to watch.

Penny Stocks To Watch

1. Modular Medical Inc. (NASDAQ: MODD)

Modular Medical is an insulin delivery technology company in its development stages. The last few months have seen MODD stock price hold a tight channel up until this week. The company gained some interest from the analyst community earlier this year with Oppenheimermaintaining an Outperform Rating as well as Benchmark coming in with a Speculative Buy and a $5 price target.

Why Is MODD stock up this week? Shares of MODD stock surged this week thanks to fresh news headlines. The company announced that it partnered with Phillips-Medisize to expand insulin delivery alternatives.

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“This collaboration has provided Modular Medical with an accelerated development process, while simultaneously preparing for significant scalability and market launch readiness,” said Kevin Schmid, COO of Modular Medical. “Phillips-Medisize brought engineering resources, insulin delivery materials and medical manufacturing knowledge, while providing supply chain expertise, to enable Modular Medical to scale rapidly and seamlessly to meet anticipated consumer demand. The collaboration is preparing Modular Medical to quickly market its new delivery technology for insulin-requiring patients with diabetes.”

Shares popped above $1.50 for the first time since May, during extended hours between Wednesday and Thursday.

2. Recruiter . Com Group Inc. (NASDAQ: RCRT)

Another one of the names on this list of penny stocks to watch this week is Recruiter . Com Group. The company has been active in August, giving several key updated. The company announced a Q2 EPS beat as well as selling its healthcare staffing business to Futuris for half a million dollars.

Miles Jennings, CEO of Recruiter, said, “By reducing operating expenses by over 60% from the first quarter of 2023 and benefiting from other income from government credits, we improved our net loss by over 70% and generated positive adjusted EBITDA of $39.7 thousand. This quarter marks a turning point, and we are enthusiastic about our continued emphasis on technology and AI-powered solutions. The numbers reflect our determination and success in aligning with our overall strategic plan, and I’m confident in the direction we’re headed. It’s a promising time for the Company as we pivot, positioning ourselves for a future filled with opportunities.”

This week the momentum continued after news that Job Mobz would acquire Recruiter’s brand in a cash and stock deal. CEO Jennings also said, “Our transaction with Job Mobz is another piece of our strategic realignment and course for the future. We plan for CognoGroup, our planned spin-out of assets from the Company, to develop our business with Job Mobz through our three-year managed service contract and be the recipient of the profit sharing from our equity position. This transaction is a calculated drive toward a leaner, technology-driven company that also creates immediate value.”

This helped spark another rally in the penny stock today. Prices rose above $0.40 for the first time in months.

3. Trust Stamp Inc. (NASDAQ: IDAI)

The identity technology company provides AI-powered trust and ID services across several sectors. Earlier this month, T Stamp also received a patent titled, “Systems and Methods for Privacy-Secured Biometric Identification and Verification.” There was also plans for a patent to be issued for “Systems and Methods for Identity Verification Via Third Party Accounts,” which was announced this week.

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In the recent round of earnings, Trust Stamp reported better EPS than its previous year’s Q2, although sales were down much greater than the same period last year. CEO Gareth N. Genner explained, “As we refocus on SaaS sales and deliveries through our Orchestration Layer platform, we continue to carefully manage expenses and have reduced selling, general, and administrative expenses by $1.85 million, or 32.49%, for YTD 2023, compared to YTD 2022. Not all of our cost rationalizations fully impacted the first two quarters, and we are continuing to implement efficiencies during fiscal 2023 resulting in additional savings that we will primarily redirect to building the Orchestration Layer sales team. We have also significantly strengthened our balance sheet by raising $7.47 million in equity capital during Q2 2023.”

Meanwhile, the latest news continues to boost Trust Stamp’s IP. News surfaced today that the company received notice of a new patent for identity authentication technology using social media entitled “Systems and Methods for Identity Authentication via Third Party Accounts.”

What do analysts think about IDAI stock? The most recent outlook from Maxim shows the firm maintains a Buy on the penny stock. It also has a $5 target price for its IDAI stock forecast.

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