Nasdaq and S&P 500 Extend Phenomenal Runs, Dow Flat
The Nasdaq and S&P 500 continued their impressive performance, adding yet another week to their exceptional runs. However, the Dow Jones flattened out just below the 39,000 level. Investors are now eagerly awaiting the upcoming earnings reports from major Dow Jones stocks Coca-Cola (KO), Cisco Systems (CSCO), Deere (DE), and Occidental Petroleum (OXY). These earnings reports, along with key inflation gauges, will play a crucial role in guiding investor decisions and identifying breakout opportunities in the late-rally market.
AI-led Rally Fuels Stock Market, But Buying Opportunities Get Tricky
Although the market’s AI-led rally continues to perform well, finding new buying opportunities is becoming increasingly challenging. However, several stocks are approaching buy points, making them worth keeping an eye on. Samsara (IOT), UiPath (PATH), Braze (BRZE), Sprout Social (SPT), and Shift4Payments (FOUR) are all software stocks with varying degrees of AI integration that are showing potential for breakout opportunities. Samsara and UiPath are particularly focused on AI, while Braze and Sprout Social also incorporate AI tools. These stocks have been flashing buy signals, indicating potential growth in the near future.
Price Indexes Set to Set Tone for the Week
With the S&P 500 reaching new heights and Federal Reserve policymakers hinting at a more conservative approach to rate cuts, the week’s economic data will likely dictate the market’s direction. The highlight of the week will be the January consumer price index (CPI), which will impact the inflation rate and subsequently influence the market. The FactSet consensus predicts a 0.2% increase in the CPI, leading to a decrease in the 12-month headline inflation rate. Additionally, the Producer Price Index (PPI), which will be released on Friday, has recently become a crucial indicator for market movement. Furthermore, retail sales data for January is also expected on Thursday, with economists predicting a slight decline due to lower auto sales.
Deere & Co. Faces Earnings Decline Amidst Falling Sales
Deere & Co., the bellwether for agricultural markets, is set to report its earnings on Thursday. Analysts anticipate a 20% decrease in earnings per share (EPS) and a 10% decline in revenue. This would mark the second consecutive quarter of falling sales for Deere, with further decline expected in 2024 and 2025. Investors will be keen to hear about Deere’s agreement with Elon Musk’s SpaceX to equip tractors with satellite internet, as well as any updates on the company’s outlook for the agricultural and construction equipment markets. Deere’s construction equipment segment, which accounts for 27% of its total revenue, has seen growth, driving up share prices for companies like Caterpillar and United Rentals.
Occidental Petroleum Faces Earnings Drop Amidst Production Struggles
Occidental Petroleum is set to report its fourth-quarter results on Wednesday. Expectations are for a 58% drop in earnings and a 16% decrease in revenue. This aligns with the company’s performance over the past three quarters. With the struggles faced by Permian Basin producers to maintain output levels, production numbers will be a key factor in evaluating Occidental’s performance. In the third quarter, Occidental’s output increased by 3%, surpassing expectations. However, the stock has experienced a decline of approximately 14% from its October high. Despite this, Warren Buffett has shown confidence in the company by purchasing over 10 million shares in December and an additional 4.3 million shares in February.
Coal Stocks Experience Pullback, Yet Market Movements Remain Strong
Coal stocks have been among the fastest-moving stocks in the market since July, despite a recent three-week pullback. Warrior Coal and Arch Coal, which have seen significant gains in recent months, are set to report their earnings this week. Analysts expect Warrior Coal to experience a 43% increase in EPS, marking its first advance in three quarters. In contrast, Arch Coal is expected to face a steep drop in earnings after a particularly profitable quarter a year ago. These earnings reports will shed light on the future of the coal industry and its impact on the market.
Martin Marietta and Vulcan Material Report on Industrial and Infrastructure Projects
Martin Marietta and Vulcan Material, two companies involved in supplying materials for industrial and infrastructure projects, are scheduled to release their earnings this week. Analysts predict a 31% EPS gain for Martin Marietta, while Vulcan Material is expected to achieve a 30% earnings target. These companies have unique insight into the spending and demand for materials driven by projects related to federal acts focused on infrastructure and inflation reduction. The performance of Martin Marietta and Vulcan Material will provide valuable insights into the state of these industries and their potential impact on the market.
Analyst comment
1. Positive news: Nasdaq and S&P 500 Extend Phenomenal Runs, Dow Flat. The market is expected to continue its strong performance, with investors eagerly awaiting earnings reports and inflation gauges to guide their decisions and identify breakout opportunities in the late-rally market.
2. Neutral news: AI-led Rally Fuels Stock Market, But Buying Opportunities Get Tricky. The market’s AI-led rally continues to perform well, but finding new buying opportunities is becoming more challenging. However, several software stocks with AI integration are showing potential for breakout opportunities, indicating potential growth in the near future.
3. Neutral to negative news: Price Indexes Set to Set Tone for the Week. The market’s direction will likely be dictated by the week’s economic data, with the highlight being the January consumer price index (CPI) impacting inflation rates. The Producer Price Index (PPI) and retail sales data for January will also be important indicators for market movement.
4. Negative news: Deere & Co. Faces Earnings Decline Amidst Falling Sales. Deere & Co. is expected to report a decline in earnings and revenue, marking the second consecutive quarter of falling sales. Investors will be keen to hear about the company’s outlook and its agreement with SpaceX, as well as any updates on the agricultural and construction equipment markets.
5. Negative news: Occidental Petroleum Faces Earnings Drop Amidst Production Struggles. Occidental Petroleum is expected to report a significant drop in earnings and revenue, consistent with its past performance. Production numbers will be crucial in evaluating the company’s performance, with Permian Basin producers facing struggles to maintain output levels.
6. Neutral news: Coal Stocks Experience Pullback, Yet Market Movements Remain Strong. Coal stocks have experienced a recent pullback, but have been among the fastest-moving stocks in the market since July. Earnings reports from Warrior Coal and Arch Coal will provide insights into the future of the coal industry and its impact on the market.
7
