Four days of steady stock market selling sent Dow industrials below 30,000, and to their lowest level since the third quarter of 2020. The Nasdaq and S&P 500 stalled below key levels, creating a crucial challenge approaching the last week of September. Tesla’s AI Day and Nike’s revenue are two key events. And another round of inflation data ends the week on Friday, making the last trading day of September a generic session.
Stocks to watch: Five stocks for a sick market
The stock market correction intensified, with major indices hitting or approaching their June lows. Now is the time to look for relative strength, to spot the next potential winners. Medical stocks, somewhat isolated from economic concerns, stand out. Eli Lily (THERE IS), Vertex Pharmaceuticals (VRTX), Neurocrine Biosciences (NBIX), McKesson (MCK) and humane (HUM) all show relative strength, although none are actionable at this time. All have clear fundamentals except for Humana, which recently broke through a short consolidation before pulling back slightly.
Econ calendar: another dose of inflation data
Economic data for the week ahead will include an August update to the Federal Reserve’s favorite inflation gauge, the Personal Consumption Expenditures Price Index, released Friday at 8:30 a.m. ET. The core PCE price index, excluding food and energy, is expected to reaccelerate to an annual gain of 4.8%. Hawkish projections released Wednesday show the Fed’s key rate rising to 4.6% in 2023. The projections seem to indicate that rate cuts won’t be on the table until core PCE inflation falls to 3% or less, which is not expected before 2024. .
The Federal Reserve expects the key rate to peak at 4.6%; Dow Jones Slides
The PCE inflation numbers are reported alongside Commerce Department personal income and spending data, which will show how general spending on goods and services is performing in the third quarter amid falling gasoline prices. . At the moment, the Atlanta Fed’s GDPNow tracker points to a growth rate of just 0.3% for the US economy in the third quarter.
On Thursday at 8:30 am we will have the third Q2 GDP update, which the government previously estimated fell 0.6%, following Q1’s 1.6% decline. With a housing sector in reverse, the economy relies more on business investment in equipment. The Durable Goods Orders report released Tuesday at 8:30 a.m. will show the latest trend.
Market outlook: Will the June lows hold?
The stock market correction has deepened, with indices losing around 5-6% in the past week. The Dow Jones Industrial Average has fallen to its lowest level since November 2020. The Nasdaq and S&P 500 are now testing their June lows, where some kind of reckoning could take place. A break below these levels would be another bearish sign for the stock market. The Innovator IBD 50 ETF, which tracks IBD’s signature index, topped 2020 lows and is at its lowest since December 2016. The fund plunged more than 11% for the week as energy stocks who had resisted sold out en masse. Many have broken through support levels or their bases have distorted with the latest wave of selling. Certainly, sell signals are appearing in several sectors. Several healthcare leaders who had resisted were also sold, which was hardly worth watching.
Blue Chips: Nike’s winnings
Nike (NKE) shares undercut support and trade at their lowest levels since the third quarter of 2020 as the company prepares to release its fiscal first quarter results on Thursday afternoon. Analysts expect the sportswear giant’s profits to drop 20%. The revenue target is up slightly to $12.28 billion from $12.25 billion a year ago. NKE has faced factory closures in China and Vietnam due to the coronavirus pandemic. In the June fourth quarter report, the company’s revenue from China fell 19%. But Nike has also made great strides in its digital and direct-to-consumer sales channels. Nike’s first-quarter revenue forecast will be only flat or slightly higher, just below analysts’ expectations. He expects fiscal 2023 revenue to grow in the double digits.
Stock buybacks fell in the second quarter, sort of
Apple (AAPL) and Google parent-Alphabet (GOOGL) led all US companies in share buybacks during the second quarter, although overall buybacks fell nearly 22% from the previous quarter, according to the S&P Dow Jones indices. Overall, second-quarter S&P 500 redemptions were $219.6 billion, down 21.8% from the first quarter’s record high of $281 billion. Information technology companies continued to lead takeovers. Buyouts by financial companies fell 61% to $21.2 billion. Healthcare buybacks fell 58% to $17.2 billion. Compared to the prior year period, in the second quarter of 2021, redemptions increased by 10%. Apple repurchased $24.56 billion of its own stock, down about 4% from a year earlier. Alphabet repurchased $15.19 billion worth of Google stock, up about 19% from a year earlier.
Tesla AI Day
You’re hereThe annual AI Day of (TSLA) will showcase the latest technologies from the world leader in electric vehicles. The event will take place on September 30, including live streams on Tesla’s website and YouTube. Optimus, the humanoid robot, is likely to headline this year’s event. Also known as the Tesla bot, Optimus eliminates “dangerous, repetitive and boring tasks,” said Tesla CEO Elon Musk. This could revolutionize factories and the service sector. Investors could also learn more about Tesla’s advancements in self-driving technology, the Cybertruck and Supercharger V4.
Measuring analyst optimism in the fourth quarter
According to FactSet, nearly 56% of the more than 10,000 stock ratings currently on S&P 500 stocks are buy ratings. Less than 6% are sell odds and about 39% are hold odds. The percentage of buy ratings is below the 10-year average and down from a high of 57.4% reached in February. Prior to this peak, the last time the percentage of buy ratings at month-end exceeded 55% was in September 2011. Ratings are most bullish (over 62% buy) in the energy, information technology and real estate. Consumer staples and utilities have the lowest percentages of buy ratings.
Stock market profits
Jabil (JBL) will release its fiscal fourth quarter results early Tuesday. Analysts expect the contracted electronics maker to earn $2.15 a share, up 49% year-over-year, on sales of $8.39 billion, up by 13%.
Cal Maine Foods (CALM) reports its first quarter results on Tuesday after the close of trading. Wall Street expects earnings to rise from a loss of 37 cents per share last year to $2.55 per share in the first quarter of 2023. Sales are expected to rise 86% to $617 million for the national retailer of eggs.
Thor Industries (THO) announces its fourth quarter results on Wednesday morning. Analysts predict EPS will fall 7% to $3.82 per share while revenue is expected to rise 3% to $3.7 billion. Wall Street predicts the maker of motor homes and emergency vehicles will earn $19.35 a share on sales of $16.2 billion for the full year.
ribbons (CTAS) releases first-quarter 2023 financial statements on Wednesday ahead of stock market action. Earnings are expected to rise 0.6% to $3.13 per share for the corporate uniforms and business services provider. Revenue is expected to rise 9% to $2.1 billion. Cintas just achieved record annual revenue in 2022.
Early Wednesday, Payment (PAYX) is expected to see a 9% gain in EPS to 97 cents on revenue growth of 9% to $1.182 billion.
Jefferies Financial (JEF) relies on its Thursday afternoon earnings report. Wall Street expects adjusted earnings to fall 38% to 93 cents per share. And revenue is expected to fall nearly 30% to $1.36 billion.
Micron Technology (MU) will release its fiscal fourth quarter results on Thursday evening. Wall Street expects the memory chipmaker to earn $1.41 per share, down 42% year-over-year, on sales of $6.82 billion, down 18%.
Early Thursday, recent meme stock Bed bath and beyond (BBBY) is likely to lose $1.80 per share against EPS of four cents a year ago. Revenue is expected to fall 27% to $1.447 billion.
As early as Thursday, a used car retailer CarMax (KMX) is expected to show EPS falling 17% to $1.43 despite sales rising 8% to $8.614 billion.
Worthington Industries (WOR) publishes its results for the first quarter of 2023 before the opening of trading on Thursday. Analysts expect the industrial manufacturing company to earn $1.63 per share, down 34% year-over-year. Wall Street forecasts revenue growth of 11% to $1.3 billion.
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