A second tough week whittled away at the market’s August gains, with the Nasdaq, S&P 500 and Dow industrials snapping support at their short-term 21-day moving averages. The stock market will closely follow the coming week’s ramp up to the August payrolls report. As earnings season winds down, a wide array of China-based stocks are due to report, as well as several security software leaders and key apparel makers and retailers.
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Stocks To Watch: Pullback Forges Buy Points
The stock market’s two-week pullback has given leading stocks a chance to pause, shake out some weak shareholders and let moving averages close some of the gap. Revived tech leaders including Apple (AAPL), Arista Networks (ANET), Monolithic Power Systems (MPWR), KLA Corp. (KLAC) and Jabil (JBL) have all formed handles. That offers investors lower entry points as the market swings into the final month of the third quarter. Apple, Arista, Monolithic Power and Jabil are all holding above key levels of support, although Monolithic has slipped below its 21-day moving average. Meanwhile, KLA is struggling to hold its 200-day line.
Econ Calendar: Payrolls, JOLTS, ADP Help Cue The Fed
The coming week will be a huge one for labor market data, capped by the August employment report on Friday at 8:30 a.m. ET. The stakes are high following Federal Reserve chair Jerome Powell’s Jackson Hole speech emphasizing the resolve to keep rates high until the risk of high inflation has receded, since the too-tight labor market is the biggest inflation risk. July’s jobs data showed things moving in the wrong direction with hiring heated up. The unemployment rate fell to 3.5%, matching a half-century low, and the labor force shrank.
Before the pivotal jobs report, which could swing the Fed toward a 75-basis-point interest rate hike on Sept. 21, we’ll get two other significant reports. The Labor Department’s job openings and labor turnover survey, known as the JOLTS report, is out on Tuesday at 10 a.m. It should continue to show a decline in the elevated number of job openings. On Wednesday at 8:15 a.m., payroll firm ADP will release its monthly employment report for the first time since May. The report has been enhanced with an expanded survey group and the inclusion of wage data. On Thursday at 10 a.m., the Institute for Supply Management’s manufacturing survey index will show whether growth continues to fade for the factory sector, which has been seeing falling new orders and smaller production gains.
Market Perspective: Mind The Short-Term Signals
Investors have a few road signs to monitor in the coming week. The Dow, S&P 500 and Nasdaq broke below their 21-day exponential moving averages on Friday. Regaining those levels would provide a significant guide as to short-term market direction. Indexes pared August gains enough to weaken the stock market’s “confirmed uptrend.” By sector, energy leads the month, up more than 6% — at least double most other sectors in August. Health care, a leader in June and July, faded this month. Earnings season is dying down, but Best Buy (BBY), Big Lots (BIG), Broadcom (AVGO) and Baidu (BIDU) could influence their industries the coming week.
Stock Market Data: A Bull’s Eye View
A few notable metrics from Yardeni Research: The federal government’s budget deficit has been shrinking, and tax revenues received a boost from inflation. The deficit has dropped to $1 trillion, down from $2.9 trillion a year ago. Commercial bank deposits reported a $172 billion increase this year, through Aug. 10. Loans, meanwhile, increased by $786 billion. Bond funds and ETFs made $87.4 billion in purchases in the 12 months through June, down from a record high of $1.1 trillion in the 12 months through April 2021. Foreign investors have been the most aggressive buyers of U.S. bonds, snapping up $840.9 billion in bonds in the 12 months through June.
July China Electric-Vehicle Sales Reports
China EV makers — Nio (NIO), Xpeng (XPEV) and Li Auto (LI) — report July sales on Thursday. Xpeng and especially Li might see some weakness due to aging models. But Nio and Li both start deliveries of new models next week. BYD (BYDDF) will also report monthly sales, possibly Q2 or first-half earnings and perhaps, with new Seal model deliveries starting, increased exports.
Security Software: CrowdStrike, SentinelOne, Okta
A round of top cybersecurity brands weigh in during the coming week, just after Palo Alto Networks (PANW) tripped a modest industry rally Monday with solid fiscal Q4 results and strong guidance. CrowdStrike Holdings (CRWD) reports earnings on Tuesday, with computer security firms SentinelOne (S) and Okta (OKTA) following on Thursday. June/July quarter earnings results have been mixed for cybersecurity firms. For CrowdStrike, analysts project a 154% earnings jump to 28 cents a share. Analysts target revenue of $516 million, up nearly 53%. Annual recurring revenue will be a key item to watch, with consensus views eyeing $2.114 billion, a 57% gain. ARR rose 61% in the April quarter. For SentinelOne, analysts predict a 25-cent loss, vs. a 20-cent loss a year ago. Analysts project revenue of $95.7 million, up 108%. Analysts also expect a wider loss for Okta amid acquisitions.
Stock Market Earnings
Tuesday:
Hewlett-Packard Enterprise (HPE) reports fiscal Q3 earnings on Aug. 30. Analysts project EPS of 47 cents, flat from a year earlier. Analysts predict HPE revenue of $6.93 billion, up a small fraction from a year earlier.
Photronics (PLAB), a top-performing semiconductor equipment stock, will report its fiscal third-quarter results early Tuesday. Analysts predict earnings of 50 cents a share, up 79%, on sales of $210 million, up 23%.
Ambarella (AMBA), a maker of video-processing chips, will post its fiscal second-quarter financials late Tuesday. Wall Street is modeling earnings per share of 19 cents, down 46%, on sales of $80.2 million, up 1%.
Best Buy (BBY) will deliver its fiscal second-quarter results early Tuesday. The consumer electronics retailer on July 27 warned of softening sales amid high inflation and deteriorating consumer sentiment. Analysts expect Best Buy earnings of $1.29 a share, down 57%, on sales of $10.3 billion, down 13%.
Wednesday:
Veeva Systems (VEEV) is on deck to report its fiscal second-quarter earnings late Wednesday. Analysts predict adjusted income of $1.01 per share and $531 million in sales. Earnings would climb about 7% as sales rise about 16.5%.
Five Below (FIVE) is expected to report a major earnings decline Wednesday afternoon. The FactSet consensus sees its EPS falling 31% to 79 cents per share. But the discount chain’s revenue is forecast to edge up 5.4% to $682 million.
Greif (GEF) reports third quarter earnings after the stock market closes on Wednesday. Analysts expect the industrial packaging company’s earnings to grow 4% to $2 per share. Wall Street forecasts revenue to increase 7% to $1.6 billion.
Credo Technology Group (CRDO) reports fiscal Q1 earnings late Aug. 31. Analysts project the data networking firm will earn 3 cents per share on revenue of $45.7 million. Trading 54% above its Jan. IPO price, the stock has formed a cup-with-handle base.
Thursday:
Broadcom (AVGO) plans to report its fiscal third-quarter earnings late Thursday. Wall Street sees the chipmaker and infrastructure software provider earning $9.56 a share, up 37%, on sales of $8.41 billion, up 24%.
Ciena (CIEN) reports fiscal Q3 earnings before the market open on Sept. 1. Analysts project EPS of 34 cents, down 63% from a year earlier. Analysts estimate revenue of $905 million, down 8% from a year earlier.
Mastercraft Boat (MCFT) announces fourth quarter results Thursday, Sept. 8, before the stock market opens. The boat manufacturer’s earnings are predicted to grow 53% to $1.50 per share. Analysts expect total sales to increase 26% to $195.3 million. Shares are just below a cup-with-handle buy point.
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