S.Stocks finished higher Friday, with both the Dow Jones Industrial Average and S&P 500 posting fourth record closes in a row. It appears that investors have decided to turn their attention to the strong earnings season, which has allayed fears about the spread of the Delta variant of the coronavirus and its impact on economic growth.
Among other things, the market hailed strong earnings results from Disney (DIS) after the media and entertainment giant not only achieved its strongest sales and earnings performance since the pre-pandemic on Thursday, it also released a strong new subscriber forecast for its streaming service Disney +. The rally in Disney stock helped the Dow gain around 15.53 points, or 0.04%, to end the session at 35,515.38.
The S&P 500 index gained 7.17 points, or 0.16%, to close at 4,468, while the tech-heavy Nasdaq Composite Index gained 6.64 points to 14,822.90. These gains are far from robust, but they are quite significant for the Dow and S&P 500. As mentioned earlier, this is the fourth record-breaking close in a row – the longest streak in nearly four years since both indices had a five-day run that ended on October 20, 2017. Notable for the Nasdaq, technology stocks struggled to gain ground this week.
Looking at the 0.2% increase this week in the iShares S&P 500 Growth ETF (IVW), which after the weekly increase of 1.3% in the iShares S&P 500 Value ETF (I HAVE), this indicates that investors are re-evaluating the growth-value trade. It’s also no coincidence that this slight anomaly occurred the same week that the U.S. Senate passed the $ 1.2 trillion bipartite infrastructure package. Assuming the package is passed by the House of Representatives and then enacted by President Joe Biden, it is poised to drive cyclical stocks higher.
Thus, value-oriented cyclical stocks could outperform into the third quarter. In particular financial stocks, which refers to the Financial Select Sector SPDR ETF (XLF) could be a tough game. However, the spread of the delta variant and its possible effects will not go away. And that reality becomes tech stocks like the FAANGs – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google Parent Alphabet (Goog , GoogL) – on growth investors’ radar to offset delta risk.
All in all, despite seemingly overbought market conditions, there are still tons of underrated buying opportunities that can give portfolios an instant boost.
As for revenue, here are the names I’ll be watching this week.
Home depot (HD) – Reports before the opening, Tuesday 17th August
Wall Street expects Home Depot to make $ 4.39 per share on revenue of $ 40.4 billion. This compares to the same quarter last year when earnings were $ 4.02 per share on revenue of $ 38.05 billion.
What to Keep in Mind: Home Depot has benefited from a steady increase in new home construction and home remodeling projects. Home Depot stock has reacted positively, up 26% year-to-date, outperforming the S&P 500 index’s 18% gain. The stock has risen sharply over the past six months, rising more than 20%, compared to a 13% increase in the S&P 500 Index. But can the housing market remain resilient? “While we remain optimistic about the duration of home improvement demand, increasing cost pressures could dampen the extent of the revisions in the second half of the year from strong comparisons,” noted analysts at Baird & Company. The company found that while revenue growth has slowed, the growth rate is still around 30% over two years. And The Baird believes the expected 5% increase in sales this quarter is viewed as conservative. The company’s forecast on Tuesday is being closely watched to determine the sustainability of the housing market.
Walmart (WMT) – Reports before the opening, Tuesday 17th August
Wall Street expects Walmart to make $ 1.54 per share on sales of $ 135.92 billion. Compared to the same quarter last year, earnings per share were $ 1.56 on sales of $ 136.82 billion.
What to watch out for: Walmart stock is only up 3% since the start of the year and has not done the way investors want it to have done after the S&P 500 index rose 18%. That could change after the earnings numbers, however, according to Bank of America analyst Robert Ohmes. Citing Walmart’s strong Q2 report as well as raised Q3 projections driven by the strength of the back-to-school / general inventory management, the analyst gave the stock a buy rating with a target price of $ 185, which calls for potential gains of 25%. Among other upbeat comments, Ohmes expects Walmart to continue growing its market share in groceries and online sales that may well outperform Amazon (AMZN), relying on Walmart’s advanced e-commerce capabilities. The expectations of the results report are high. From its record top line beats to strong sales in the same store, to consistent execution across all product categories, to increasing margins, Walmart’s recent results have been nothing short of impressive. But the company is now faced with much tougher conditions. Can it continue to deliver on Tuesday?
Cisco (CSCO) – Reports after close of trading, Wednesday, August 18
Wall Street expects Cisco to make 82 cents per share on sales of $ 13.02 billion. Compared to the same quarter last year, earnings were 80 cents per share on sales of 12.15 billion US dollars.
What to Watch Out for: Cisco stock is on a nice uptrend, up about 50% since last November, driven not only by the economic recovery but also by increasing demand for infrastructure and network services. Although the pandemic has actually impacted Cisco’s business, forcing corporate and corporate customers to either postpone orders or suspend projects entirely, the company remains in a strong position to cope with the increasing demand for digital networks for both education – as well as profit for business purposes. In addition, as demonstrated by recent acquisitions, Cisco is increasingly shifting its business model to software and applications, especially services that generate high recurring revenues. And thanks in part to its careful cost control, the company has amassed tons of financial strength for further acquisitions or organic expansion. With its stock price still trading at such a cheap valuation, combined with its strong dividend yield, now is the time to take a closer look at Cisco. But the company wants some assurances on Wednesday that Cisco can quickly switch to new growth companies to offset the declines in sales in the legacy segments.
Nvidia (NVDA) – Reports after close of trading Wednesday, August 18
Wall Street expects Nvidia to make $ 1.02 per share on sales of $ 6.34 billion. Compared to the same quarter last year, earnings were 55 cents per share on sales of 3.87 billion US dollars.
Note: Up 33% year-to-date, while the graphics chip powerhouse stock rose 52% last year, the graphics chip powerhouse stock is one of the top performing not only among chip stocks, but also in the technology sector as a whole . For nine straight quarters of profitability, investors have been less concerned about valuation and more focused on Nvidia’s growth capabilities in key graphics card markets, particularly video games. In addition, the company is a leader in chip production for high-growth areas such as network data centers, autonomous driving, artificial intelligence and others. Called the company a top-tier artificial intelligence company, Rosenblatt Securities analyst Hans Mosesmann recently reiterated a buy rating on the stock and raised its price target from $ 200 to $ 250. Nonetheless, Nvidia’s forecast on Wednesday will be the key factor in whether the stock will continue on its uptrend or succumb to profit-taking.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
