Here’s your weekly Investing Action Plan as the stock market heads into a four-day trading week, shortened by Monday’s Martin Luther King Jr. Holiday. Investors are monitoring the pressured market uptrend, to see whether the Nasdaq Composite will hold support at its 200-day moving average, and whether the S&P 500 will undercut its Jan. 10 low. Meanwhile, the December-quarter reporting season gathers more momentum with banks, airlines, railroads and Netflix set to dominate the short week.
Dow Jones giant Caterpillar (CAT), Deere (DE), Ashland Global Holdings (ASH), Crane (CR) and Ingersoll-Rand (IR) are five industrial names trading near buy points on the stock market. A solid global economic recovery, fueled by healthy December inflation numbers out of China, is fueling demand. All these stocks have relatively low price-to-earnings ratios as rising interest rates weigh heavily on highly valued growth names. Their relative strength lines are near highs, or at least improving over the past several weeks.
Specialty chemicals maker Ashland Global is finding support at its 50-day line, as it works on a flat-base, base-on-base buy point of 110.84, according to MarketSmith chart analysis. Ashland is Thursday’s IBD Stock Of The Day.
Ag equipment maker Deere, Friday’s Stock Of The Day, has shaped a handle following a monthslong consolidation. The handle has a 386.65 buy point, although the base formed level with the stock’s prior two consolidations. The breakouts from those prior two patterns failed within a couple of days, so investors should treat this stock with particular caution.
Crane has also shaped three consecutive bases, but unlike Deere, each base has been slightly higher than the last. A specialist in industrial valves, the stock is nearing a 108.77 entry in what IBD MarketSmith analysis charts as a nine-week flat base.
Ingersoll-Rand has long been the leader in industrial compressors, the kind that oil field services outfits use to force fluids into the earth in order to fracture reservoirs holding oil and natural gas. The stock backed off over the past two weeks, undercutting support at the 50-day moving average. But it stopped short of triggering the automatic sell rule after topping a 62.16 entry at the start of the year. So the buy point remains in play.
Dow Jones Stock Caterpillar Advances
Dow Jones heavy metal leader Caterpillar has climbed more than 21% from a September low. A big jump back above the stock’s 200-day moving average provided an early entry for daring investors. However, shares are back above the midpoint of the seven-month consolidation, so they could shape a handle at any point. Caterpillar’s relative strength line is at its highest mark since August, a sign of strength ahead of the company’s Jan. 28 earnings news release.
More Bank Earnings: Goldman Sachs, Mellon Bank, PNC
Bank earnings: After a big reporting day on Friday, banks and brokers will continue to set the tone for a week shortened by Monday’s MLK holiday. Goldman Sachs (GS), Charles Schwab (SCHW), PNC (PNC) and Mellon Bank (BK) launch the opening salvo on Tuesday. Reports Friday from JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) all topped estimates, a positive early indicator. Of the finance names set to report during the coming week, at least 25 stocks are near buy points or in the midst of breakout efforts.
A Big Week For 5G: Verizon, AT&T
After agreeing to more than six weeks of delays requested by the U.S. Department of Transportation, Verizon (VZ) and AT&T (T) plan to launch, on Wednesday, Jan. 19, 5G networks in bandwidth adjacent to that used by aircraft radar altimeters. Aircraft rely on the altimeters to navigate in low visibility. On Jan. 25, the FCC is scheduled to go to court with the American Association of State Highway and Transportation Officials and the Intelligent Transportation Society of America over similar concerns, regarding bandwidth used by the auto industry.
Stock Market Econ: China GDP, Housing Data, Jobless Claims
Monday’s release of Q4 GDP, industrial production and retail sales data in China could influence U.S. markets when they reopen on Tuesday. Hopes for Chinese economic strength in 2022 are buoying industrial metals prices. But the data won’t yet reflect a rise in omicron cases in China, so investors may not extrapolate trends.
U.S. data in the coming week has a heavy housing focus, though the recent rise in Treasury yields, if it continues, could shift the outlook in the months ahead. On Tuesday, the NAHB Housing Market Index for January, out at 10 a.m. ET, will provide a fresh look at builders’ assessment of current sales and homebuyer traffic, as well as the six-month outlook. Housing starts and building permits out at 10 a.m. on Wednesday will show if these leading indicators for new home sales sustained their November strength. Existing-home sales, Thursday at 10 a.m., will show if positive recent trends continued, despite tight supplies and high prices.
Initial jobless claims on Thursday at 8:30 a.m. may get more attention after the latest report showed new filings for unemployment benefits jumped to 230,000 in the most recent week, the highest since mid-November, amid rampant omicron cases. Still, none of the data is likely to affect the Fed’s policy outlook when members next meet on Jan. 25-26.
Stock Market Earnings: J.B. Hunt, ASML Holding, Morgan Stanley
Trucking and logistics leader J.B. Hunt (JBHT) reports Q4 results after the stock market closes on Tuesday. Analysts project a 27% earnings gain, to $1.14 per share. Revenue growth is projected at 34%, to $168.8 million. After a 49.6% gain in 2021, J.B. Hunt shares are poised, ahead of earnings, for either a possible rebound from 50-day, or a dive below support.
Semiconductor equipment supplier ASML (ASML) plans to report its fourth-quarter results on Wednesday. Analysts expect the Dutch company to earn $4.27 per U.S. share, up 9% year over year, according to FactSet. Sales are forecast to increase 14% to $5.89 billion. ASML also will give an update on the impact of a Jan. 2 fire at its factory in Berlin, Germany. The fire damaged an area that produces the wafer clamp, a module in its extreme ultraviolet (EUV) lithography systems.
Morgan Stanley (MS) reports fourth-quarter earnings on Wednesday. Wall Street expects the bank to earn $1.94 per share, up 1%, on revenue up 7% to $14.558 billion. The earnings arrive after the company’s investment banking revenue jumped in the prior quarter, helped by M&A and IPO activity. But since then, omicron has surged and the Fed has said it will take a more aggressive stance against inflation, raising uncertainty about the market environment.
Intuitive Surgical, Schlumberger Earnings
Late Thursday, Intuitive Surgical (ISRG) is expected to report adjusted income of $1.28 per share on $1.52 billion in sales for its fourth quarter. Earnings would rise 7.6% and sales would increase 14.1% year over year. ISRG stock has been in a free fall since the start of the year, down almost 15% in January.
Schlumberger (SLB) will report Q4 results before the stock market opens Friday. Analysts expect the oil field services provider’s earnings to jump 77% to 39 cents per share with revenue up 26% to $6.09 billion. Schlumberger is known for giving a market update on oil and the state of the energy sector in general as it kicks off earnings season for the oil and gas industry. Schlumberger stock on Friday was in a buy range after a breakout from a 10-week cup base.
Netflix Earnings: Subscriber-Adds In Focus
Internet television network Netflix (NFLX) will release its fourth-quarter results late Thursday. Wall Street analysts have forecast Netflix adding 8.39 million new subscribers in the December quarter. Three months ago, Netflix projected adding 8.5 million subscribers in the period. FactSet estimates have Netflix earnings falling 29% year over year to 85 cents a share in Q4. Sales are seen rising 16% to $7.71 billion.
Dow Jones Earnings: UnitedHealth Group
Dow Jones health care giant UnitedHealth Group (UNH) kicks off Q4 earnings for the managed-care group before Wednesday’s open. Analysts expect the Dow Jones component to post EPS of $4.30, up 71% from a Covid-depressed year-ago result. Revenue is seen rising 11.7% to $73.1 billion. While the Medical-Managed Care group has been a laggard, ranked No. 143 of 197 industry groups by IBD, UNH stock has acted well since breaking out on the heels of its Q3 report. UNH stock remains just above a buy zone, but found support at its 50-day/10-week line in recent days, which can be used as an early entry point.
Stock Market Transports: Airlines, Railroad Earnings
Airline earnings continue with United Airlines (UAL) and American Airlines (AAL) reporting Q4 results before the stock market opens Thursday. Analysts see United posting a loss of $2.09 per share, down from a loss of $7 per share in the year-ago quarter. Revenue is seen soaring 134% to $7.96 billion. American is seen reporting a loss of $1.59 per share vs. a loss of $3.86 a year ago. Revenue is expected to climb 130% to $9.3 billion.
Late Thursday, railroad operator CSX (CSX) is likely to post a 19% EPS increase to 41 cents on an 20% revenue gain to $3.319 billion. The Street sees Union Pacific (UNP) early Thursday delivering a 10% EPS gain to $2.61 on 9% sales growth to $5.604 billion. Carload volumes are seen falling for both in the December quarter, according to FactSet. Rail stocks rallied late last year despite lingering supply chain bottlenecks from the pandemic. The railroad operators implemented Precision Scheduled Railroading (PSR), a turnaround strategy to lower costs and improve efficiencies. That has broadly helped their operating ratios, a key measure of profitability. Canadian Pacific (CP), which bought Kansas City Southern, reports Jan. 27. The CP-KSU merger awaits federal approval, reports last December said.
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