Job, manufacturing and housing data hinted over the past week that inflation was losing its edge. That’s an encouraging message for the stock market just ahead of the coming week’s Federal Reserve rate decision. It will also be the earnings season’s heaviest reporting week for the Dow industrials, as well as heavyweight tech names led by Apple, Google, Amazon and Microsoft.
Stocks To Watch:
The market rally has been gaining steam, but not too many stocks are setting up. Amgen (AMGN) is near a buy point just above its 50-day line. Keep in mind that the stock has only moderate sales growth, and has a had a series of failed bases over the past year.
Fortinet (FTNT) is trying to get above its 200-day line — an ongoing line of resistance. Ulta Beauty (ULTA) is near key resistance within a base. Lithium giant SQM (SQM) is back above its 50-day line, while Neurocrine Biosciences (NBIX) is setting up near a handle entry.
Federal Reserve/Inflation Watch
The Federal Reserve looks certain to hike its key interest rate 75 basis points at the two-day meeting that wraps up Wednesday at 2 p.m. ET. The market reaction will be all about how the Fed’s characterization of the state of the economy and inflation outlook alter policy expectations.
Will the policy statement and Fed chief Jerome Powell, in his news conference, acknowledge the job market is softening? Probably a bit. But at this point, evidence of weakness might not be pervasive enough to substantially change the Fed’s tone that its determination to bring inflation down is unconditional. That means the Fed won’t react to economic weakness until enough progress is made on the inflation front, and we’re clearly not there yet.
Still, market pricing currently suggests nearly even odds for a 50- or 75-basis-point move in September. If Powell guides to a half-point move, investors may cheer.
Economic Calendar: Consumer Spending/Sentiment
Even apart from the Fed meeting, the coming week is a big one for assessing the economy’s path. With new jobless claims hitting an eight-month high of 251,000 in the latest report, Thursday’s update at 8:30 a.m. will carry increased importance. At the same time on Thursday, we’ll get the government’s first estimate for Q2 GDP, and it may not be encouraging. The Atlanta Fed’s model shows a 1.6% decline, though the consensus forecast calls for a slight rise.
Friday’s menu is jam-packed, with two key reports out at 8:30 a.m. While retail sales were solid in June, the personal income and spending report will include outlays on services to give a broader picture of consumer strength. We won’t just find out how much spending grew in nominal terms, but whether it managed to grow in real terms. That’s because the report also includes the Fed’s favored inflation gauge: the personal consumption expenditures price index.
The Employment Cost Index is key because the quarterly report is the Fed’s most reliable gauge of wage growth. Wage gains have been running too hot for the Fed, but the report could show a welcome moderation.
Then at 10 a.m. comes the University of Michigan consumer sentiment survey, which will include a potentially important update on long-term inflation expectations.
Apple Seen Posting Anemic Sales Growth
Consumer electronics giant Apple (AAPL) will report its June-quarter results late Thursday. Analysts polled by FactSet expect Apple to earn $1.16 a share on sales of $82.6 billion in its fiscal third quarter. That would translate to a year-over-year decline of 11% in earnings with sales up just 1.5%.
Three months ago, Apple warned that Covid-related shutdowns in China would negatively impact its June-quarter performance. The company also faces weakening consumer spending and macroeconomic headwinds. Apple stock has been rising ahead of its earnings report. It has been consolidating for the past 29 weeks with a buy point of 183.04, according to IBD MarketSmith charts.
Big Week For The Dow: Apple, Microsoft, Boeing, Caterpillar
The Dow bears down hard on Q2 reporting season, with nearly half of its 30 stocks reporting in the coming week. Microsoft (MSFT), Visa (V), Coca-Cola (KO), McDonald’s (MCD) and 3M (MMM) kick off the week on Monday. Apple, Boeing (BA), Intel (INTC) and Honeywell (HON) check in on Thursday. Caterpillar (CAT), Chevron (CVX) and Procter & Gamble (PG) bat cleanup on Friday.
Big Pharma Weighs In: Bristol Myers Squibb, Teva, GlaxoSmithKline
A cadre from the Big Pharma group will weigh in with second-quarter earnings next Wednesday and Thursday. Bristol Myers Squibb (BMY), Teva Pharmaceuticals (TEVA) and GlaxoSmithKline (GSK) are all on deck early Wednesday.
Analysts expect Bristol to report declines, with sales falling 2% to $11.45 billion and adjusted earnings of $1.80 per share, down 7%. Similarly, analysts predict Teva’s earnings per share will fall 5% to 56 cents. They see sales declining about 3% at $3.78 billion. GSK is expected to earn 32 cents per share on $8.29 billion in sales, down a respective 18% and 26%. The decline for GSK’s report comes after the company separated its consumer health division into a new business called Haleon.
Pfizer (PFE) and Merck (MRK) will follow Thursday morning. The Street predicts Pfizer earnings of $1.74 per share and $25.73 billion in sales, growing 62% and 36%. The strong growth comes as Pfizer and other vaccine makers aim to launch updated Covid booster shots this fall. Merck is expected to report adjusted income of $1.68 per share on $13.83 billion in sales. Earnings would pop 28% and sales would rise 21%.
Intel, Qualcomm Lead Q2 Chip Earnings
The week ahead will see second-quarter earnings reports from over a dozen semiconductor companies, including Intel (INTC), NXP Semiconductors (NXPI), Qualcomm (QCOM) and Texas Instruments (TXN). Investors will be looking for signs of declining chip demand and an expected downturn in the chip cycle. They also are bracing for cuts to capital expenditures that would impact semiconductor equipment vendors. Chip gear firms reporting Q2 results in the week ahead include KLA (KLAC) and Lam Research (LRCX).
Energy Earnings: Exxon, Chevron
Energy giants Exxon Mobil (XOM) and Chevron will announce second-quarter earnings on Friday. Wall Street predicts EPS of $3.84 and revenue of $111.3 billion for XOM. For Dow Jones stock CVX, analysts are forecasting sales of $58.6 billion and EPS of $5.07. Spending outlooks for the two companies are key. Investors should keep an eye on capital expenditures to see if there have been industry cost increases.
Oilfield service firms Halliburton (HAL) and Baker Hughes (BKR) both reported this week that inflationary costs were a concern. First-quarter reporting showed capital spending budgets for oil and gas producers were up an average of 23% this year vs. 2021. That included a 57% increase from Exxon Mobil, to $4.9 billion. Chevron stuck to its previously announced 12% increase for the year, to $2.8 billion. The bulk of that spending, some analysts have estimated around two-thirds, went toward covering inflation costs at current oilfields and that only 8% was for new production growth.
FANG Stock Earnings: Google-parent Alphabet
Alphabet (GOOGL) reports earnings late July 26. Google faces more difficult year-over-year growth comparisons in 2022 as the coronavirus emergency fades. And, consensus estimates have been coming down amid worries that a possible U.S. recession will impact digital ad revenue growth. Revenue will grow nearly 13% to $70.2 billion, slowing from the prior year’s 62% growth, according to consensus estimates. EPS is expected to fall 6% to $1.28. Amid the Nasdaq’s fall, some analysts anticipate investment write-downs that would lower EPS.
FANG Stock Earnings: Amazon
Amazon.com (AMZN) reports second-quarter results late Thursday. The consensus is a 13-cent profit, down from 76 cents in the year-ago period. The expectation on revenue is $119.2 billion, up 5%. That’s Amazon’s fourth quarter in a row of decelerating growth. Amazon proved vulnerable when it uncharacteristically fell far short of Wall Street’s forecast with first-quarter results. Investors wonder whether the disastrous earnings report was a fluke or a sign of things to come.
U.S. Automakers: Ford, General Motors
General Motors (GM) reports early Tuesday. Earnings per share are likely to crumble 35% as revenue falls 0.9%. Late Wednesday, Ford (F) earnings should vault 246% as revenue grows 38%. In Q2, sales in the U.S. fell 15% for GM and rose 2% for Ford.
Defense Earnings: Raytheon, General Dynamics, Northrop
Defense companies hope to reverse their current trend with earnings reports this week. Market conditions and supply-chain issues sent the sector’s stocks sliding and industry’s leaders lost all their gains from Russia’s invasion of Ukraine. But President Biden’s proposed $813 billion defense budget for FY2023 should boost their outlook. And NATO’s anticipated expansion could trigger another round of European defense spending.
Raytheon is expected to report 8.7% earnings growth to $1.12 per share, from $1.03 last year. Analysts predict revenue to grow to $16.6 billion from $15.9 billion.
General Dynamics (GD) is expected to report 4% EPS growth to $2.72 and 2.2% revenue growth to $9.4 billion.
Northrop Grumman (NOC) has outperformed its peers lately, but results are expected to slide for Q2. Analysts predict EPS will fall 6% to $6.04 and revenue will fall 0.9% to $9.07 billion.
Stock Market Earnings
Range Resources (RRC) reports its second-quarter earnings on Monday, July 25, after the market closes. Analysts are predicting EPS of $1.26 and revenue of $990 million for the natural gas company.
Tata Motors (TTM) is basing around the 50-day average. On Wednesday, the Jaguar Land Rover brand owner is expected to lose 3 cents per ADR, down from a 78-cent loss a year ago, as revenue grows 2%.
Early Tuesday, General Electric (GE) is likely to post a 7% EPS decline despite a 3% sales rebound, after announcing names for the three companies that will emerge after its impending big split: GE HealthCare, GE Aerospace and GE Vernova (power).
Starbucks (SBUX) earnings are expected to fall 23% to 77 cents per share while revenue is predicted to grow 8.5% to $8.14 billion. SBUX stock is in a bottoming base and trading 30% lower than its previous buy point. The stock is above its 10- and 50- day lines but trading 11% below its 200-day average.
Archer-Daniels-Midland (ADM), the grain processor and agribusiness, posts Q2 results before Tuesday’s open. EPS is seen rising 28.6% to $1.71 on revenue growth of 9.7% to $25.2 billion. ADM stock, after soaring as Russia’s invasion of Ukraine exacerbated tight grain supplies, has faded below its 200-day line as grain prices have come back down.
UPS (UPS), the package-delivery giant, reports second-quarter earnings on Tuesday. Wall Street expects UPS to earn $3.16 per share, up 3%, on revenue of $24.648 billion, up 5%.
United Rentals (URI) earnings are expected to grow 38.8% to $6.47 per share. Analysts predict revenue will climb 18% to $2.7 billion. URI stock broke its 50-day line earlier this week but is still trading below its 200-day average.
Lamb Weston (LW) is rallying and nearing its 52-week high ahead of earnings. The food processor is expected to report 15% earnings growth to 51 cents per share and 6.5% revenue growth to $1.07 billion.
Roku (ROKU) will report its Q2 results late Thursday. Analysts expect the streaming video platform to add 810,000 active accounts, bringing its total to 62.1 million. Roku is forecast to lose 68 cents a share on sales of $804 million in the June quarter.
Early Thursday, Mastercard (MA) should deliver a 21% EPS increase on a 16% revenue gain, with the rapid rise in the dollar a potential headwind for multinational companies.
Northrop Grumman (NOC) is expected to announce EPS of $6.04 on $9.07 billion of revenue. NOC stock is in a seven-week flat base and well above its 200-day line but has yet to reclaim its 50-day average.
Crocs (CROX) earnings are forecast to skyrocket 167% to $2.70 per share. And revenue is expected to spike 185% to $949 million. The shoemaker has beaten analyst estimates for the last eight quarters.
Southwest (LUV) reports second-quarter earnings on Thursday. Analysts expect the airline to earn $1.17 per share, up from a loss a year ago. Revenue is expected to rise 67% to $6.685 billion.
AbbVie (ABBV) is expected early Friday to report adjusted earnings of $3.34 per share and sales of $14.67 billion. Earnings would jump more than 7% and sales would advance about 5%.
Shell Midstream Partners (SHLX) is expected to announce Q2 earnings Friday. Wall Street is predicting EPS of 37 cents. Sales are expected to come in at $113.6 million for the oil infrastructure operator and developer.
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