BREAKING: Will Fed Chief Powell Hurt Stocks Again?
As November ticks down to its final few sessions, the market sits on a merry little rebound. What is in store for December’s stock market may be partly revealed this week, in crucial November payrolls and the personal consumer expenditures index. Corporate discussion of a pending recession has cooled somewhat. A looming OPEC vote and Russia oil embargo have the potential to rattle or stir energy markets. China’s November EV sales reports may provide glimpses into the country’s rebound in Covid lockdown worries. And as the earnings season winds toward its finish, Dollar General (DG), Salesforce.com (CRM) and Ulta Beauty (ULTA) are among the companies to report.
The stock market is consolidating, with the S&P 500 moving toward the key 200-day moving average. Investors should be building up their watchlists with stocks setting up or flashing buy signals. Dexcom (DXCM), RBC Bearings (RBC), Chubb (CB), EQT Corp. (EQT) and Regeneron Pharmaceuticals (REGN) are showing strong action. Dexcom is consolidating again after strong gains, forging what could be seen as a handle to a long base. Chubb and RBC Bearings are also near cup-with-handle buy points. EQT stock has already flashed an early entry. Regeneron is trading tightly near highs and key moving averages.
Next Friday’s November jobs report, if it’s as weak as current estimates suggest, could be the beginning of the end of Fed tightening. According to FXStreet, economists expect employer payrolls to shrink by 30,000, a sharp comedown from October’s 261,000 gain, which was the weakest since December 2020, before vaccines became widely available. The employment report will wrap up a huge week of data. On Wednesday, we’ll get a second estimate of Q3 GDP at 8:30 a.m. ET, followed by the Job Openings and Labor Turnover survey at 10 a.m. On Thursday at 8:30, we’ll get the October update of the Fed’s favored inflation report, the PCE price index, along with the latest week of jobless claims. At 10 a.m., the Institute for Supply Management’s manufacturing survey index could show a drop below the 50 neutral level.
As the stock market prepares to head into December, the big benchmarks are still down for the year: the Dow industrials has about a 6% loss, the S&P 500 is down more than 15% and the Nasdaq sits on a 28% decline. But since hitting a mid-October low, the Dow has gained more than 19%. The S&P 500 has climbed more than 15% in the same period. The Nasdaq composite has lagged, up not quite 12%. The advance puts the Dow almost even with its 34,281 high from mid-August. A break above that point would put the index at its highest point since April. The S&P on Friday traded less than 1% below its 200-day moving average, a line that it has touched, but not closed above since early April. The Nasdaq retook its 50-day line early in November, and is sitting 3% above that level of support.
Chinese EV startups Nio (NIO), Xpeng (XPEV) and Li Auto (LI) tee up to report November EV sales, likely on Thursday. China EV and battery giant BYD (BYDDF) should follow a few days later. Nio will be especially watched, after its October deliveries fell vs. September and missed its target for record monthly deliveries. The once-hot startup was supposed to be in a “product supercycle” after launching several new electric models, but Covid-19 and operational issues are weighing on execution. Deutsche Bank analysts expect Nio deliveries to rise from around 10,000 in October to 13,500 in November and to 19,500 in December, saying the worst may be over. In October, BYD’s all-electric sales more than doubled to top 100,000 for the first time, narrowing the gap with Tesla (TSLA).
Already highly active oil and natural gas markets could see more price jockeying ahead of a Dec. 4 meeting of the Organization of Petroleum Exporting Countries and allies including Russia. News reports say a 500,000 barrel-per-day output increase is on the table. But multiple OPEC members, including Saudi officials, deny the reports. The European Union aims to launch its embargo against Russian oil on Dec. 5. EU leaders are attempting to negotiate a cap for Russian oil sold outside of the embargo zone, but Russia already sells its oil below the range of the proposed cap, and has plans to ignore the EU price rules. That raises questions about the embargo’s effectiveness.
Discount chains serve up Q3 results on Wednesday and Thursday ahead of the holiday season. It’s been a mixed bag for retail earnings as added inflation-pressured consumers shift their spending habits. Dollar General’s earnings rebound is expected to accelerate with a 22% jump, and a 10.6% revenue gain. That would mark a fifth straight uptick in sales momentum. Ollie’s Bargain Outlet (OLLI) is expected to chalk up a 17% EPS gain, its first earnings advance in six quarters. A loss is projected for fellow discounter Big Lots (BIG).
As companies lay off workers and batten down hatches ahead of a possible economic slowdown, executives from 179 S&P 500 companies mentioned the word “recession” in conference calls between Sept. 15 and Nov. 16, according to FactSet. (About 6% of S&P 500 companies had not yet reported.) That was a 26% decrease from the record 242 companies that used the word during second-quarter calls between June 15 and September 14. However, it was also far above the five-year average of 63 companies. Sectors with the highest number of mentions were financials (34) and industrials (32). Sectors with the highest percentage of companies mentioning recession were real estate (67%), materials (57%) and financials (54%). The sectors with the largest declines in recession mentions include financials (-20%) and information technology (-10%). Analysts cut EPS estimates, in aggregate, by 3.3% in October — more than double the five-year average of 1.4%. The index is now collectively expected to report is first EPS decline, an estimated 2.1% decrease, since a 5.7% drop in the third quarter of 2020.
NetApp (NTAP) reports fiscal second-quarter results late Tuesday. Analysts expect earnings of $1.33 a share, up 44%, on revenue of $1.67 billion, up 7%, for the provider of enterprise storage management systems.
CrowdStrike Holding (CRWD) reports Q3 earnings after the market close on Nov. 29. Analysts expect the cybersecurity firm’s profit to pop 88% to 32 cents, with revenue climbing 51% to $575 million.
Enterprise software maker Workday (WDAY) reports Q3 earnings late Nov. 29. Analysts estimate EPS of 84 cents, down 23% from a year earlier. Analysts predict revenue growth of 19% to $1.585 billion.
Hewlett Packard Enterprise (HPE) reports fiscal Q4 earnings late Nov. 29. Analysts estimate earnings of 57 cents per share, up 9% from a year earlier, with revenue growing 1% to $7.37 billion.
Titan Machinery (TITN) reports third-quarter earnings before the stock market opens Wednesday. The Street forecasts earnings growing 21% to $1.16 per share for the agricultural and construction equipment manufacturer. Analysts predict revenue increasing 31% to $597 million in Q3.
Salesforce.com (CRM) reports Q3 earnings late Nov. 30. Analysts expect the leader in software-as-a-service to earn $1.22 a share, down 4% from a year earlier. Analysts estimate 14% revenue growth to $7.83 billion.
Cloud computing software maker Snowflake (SNOW) reports Q3 earnings late Nov. 30. Analysts predict flat earnings at 4 cents. Revenue is expected to boom 61% to $539.1 million.
Synopsys (SNPS) plans to report its fiscal fourth-quarter results late Wednesday. Analysts expect the chip design software maker to earn $1.85 a share, up 2% year over year, on sales of $1.28 billion, up 11%.
Pure Storage (PSTG) reports quarterly results late Wednesday. Analysts expect the company to report earnings of 25 cents a share, up 14%, on revenue of $672 million, up 19%, for the data storage and enterprise networking company.
Box (BOX) reports quarterly results late Wednesday. Analyst expect earnings of 30 cents a share, up 36%, on revenue of $251 million. That’s up 12% for the provider of cloud-based business collaboration and content management services.
Kroger (KR) is due Early Thursday. The supermarket giant should see a 4% EPS gain to 81 cents on a 7% revenue increase. KR stock is basing around long-term moving averages with a 62.88 buy point.
Cybersecurity firm Zscaler (ZS) reports fiscal Q1 earnings late Dec. 1. Analysts project EPS of 26 cents, up 86% from a year earlier. Analysts estimate revenue of $340.7 million, up 49%.
Medical software maker Veeva Systems (VEEV) reports fiscal Q3 earnings on Dec. 1. Analysts expect EPS to grow 10% to $1.07. Analysts estimate revenue of $546 million, up nearly 15%.
Ulta Beauty (ULTA) reports late Thursday. Analysts project a 5% EPS increase to $4.11 on a 10% revenue gain. ULTA stock is just below a 451.40 buy point from a cup base and back above the 50-day moving average after rallying off October lows.
Marvell Technology (MRVL) will post its fiscal third-quarter results late Thursday. Wall Street is modeling Marvell earnings of 59 cents a share on sales of $1.56 billion. That would translate to year-over-year growth of 37% in earnings and 28% in sales for the chipmaker.
Splunk (SPLK) reports fiscal third-quarter results late Thursday. Analysts expect earnings of 25 cents a share, compared with a loss of 37 cents. The consensus on revenue is $847 million, up 27%, for the provider of data analytics.
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(© Dave Cutler)
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