How Low Will the Stock Market Go?
The stock market had a mixed week, with conflicting signals coming from the big benchmarks. It’s not surprising that an extended market has chosen the traditionally weak stretch of the summer to consolidate its gains. The question now is, “How low do we go?” According to Sam Stovall at CFRA, the S&P 500 could surrender a total of 5% to 12% before resuming the bull-market advance.
This coming week, retail earnings will likely play a big part in how the market performs. Retail giants Walmart and Home Depot lead the list of companies to watch. Additionally, July retail sales data from the Commerce Department could influence market sentiment on Tuesday. Other names to keep an eye on include Cardinal Health, Cisco Systems, On Holdings, and Palo Alto Networks.
With the market rally under pressure and many leading stocks crumbling, investors should be cautious and focus on building their watchlists with resilient stocks. Some good examples of resilient stocks are oil services giant SLB, Arista Networks, KB Home, Carnival, and Mastercard. All of these stocks are trading around buy points from proper bases, with SLB, Arista, KB Home, and Carnival boasting Relative Strength Ratings of 90 or higher.
In terms of economic news, this coming week is packed with key reports. Investors will be closely watching the July retail sales data, as well as sentiment from the National Association of Homebuilders, and the July housing starts and permits data from the Commerce Department. Additionally, China’s July industrial production, retail sales, and employment data will also be closely monitored.
In terms of specific stocks, the late-season surge of retail earnings reports has led to divergent expectations for Target and Walmart. While Walmart is expected to post a slight decline in earnings, Target’s earnings are expected to soar. However, there are mixed opinions on both stocks, with Credit Suisse hailing Walmart’s defensive characteristics, while Barclays warns of resistance to Target’s earnings recovery.
Looking at the stock market as a whole, the Nasdaq punched below 50-day support in a mixed week, while the S&P 500 tested that line. The Dow, on the other hand, held firm at its 21-day exponential average. Heading into the end-of-summer doldrums, the Nasdaq is down in three of four recent weeks, while the Dow is up in three of four, and the S&P 500 is evenly balanced.
In terms of specific companies reporting earnings this week, there are a number of notable names to watch. Cardinal Health is expected to report a 42% increase in earnings and a 12% increase in sales. H&R Block is projected to see a 31.5% spike in earnings, while SeaDrill is expected to see earnings soar to $7.33 per share. On Holdings is expected to report a decline in earnings, but a significant increase in revenue. TJX is forecasted to see an 11% EPS rebound, while Brinker International is expected to report a 15% growth in EPS. Applied Materials and Lumentum Holdings are both expected to see declines in EPS and revenue, while Palo Alto Networks is expected to see a significant increase in both metrics. Finally, Deere is projected to deliver a 42% EPS jump, while XPeng is expected to narrow losses.
Overall, the stock market is facing uncertain times, with the potential for further declines. Investors should exercise caution and focus on resilient stocks. Additionally, retail earnings and economic data will be closely watched for further market guidance.
Analyst comment
Neutral news: How Low Will the Stock Market Go?
As an analyst, my prediction is that the stock market will face some further declines in the coming weeks. Investors should exercise caution and focus on resilient stocks. The upcoming retail earnings and economic data will provide guidance for the market’s direction.
