Good afternoon and happy Saturday to all of you here on r/StockMarket. I hope everyone on this subreddit made out pretty nicely in the market this past week, and is ready for the new trading week ahead.
Here is everything you need to know to get you ready for the trading week beginning July 8th, 2019.
The week ahead: Powell's testimony could make or break the stock rally - (Source)
Federal Reserve Chair Jerome Powell has the opportunity to reinforce market expectations for a late July rate cut or rein them in when he speaks to Congress in the week ahead.
Powell testifies before the House Financial Services Committee Wednesday and at the Senate Banking Committee Thursday, and is expected to answer questions on the economy and Fed policy.
His testimony comes after a strong June jobs report raised questions about whether the Fed will actually cut rates this month. The U.S. economy added 224,000 jobs last month, easily topping a Dow Jones estimate of 165,000. The report sent the benchmark 10-year Treasury yield back above the key 2% level. The dollar also rallied against a basket of currencies, pressuring commodities like gold.
The report was "stronger than expected, but with an accompanying -11k in revisions the job gains were nothing to derail the Fed's anticipated cut in 26 days," Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, wrote in a note. The Fed next decides on rates on July 31.
In the coming week, the market also has other places to look for clues on Fed policy, including in the Fed's minutes from its last meeting, after which it suggested it could cut rates if it needs to. Those minutes are released Wednesday afternoon. There is also important consumer price index inflation data Thursday and producer level inflation data on Friday, when PPI is reported.
But Powell's comments to Congressional committees could clarify whether the Fed is on course to cut interest rates later this month, as widely expected.
"It's not clear to me the data are going to create a screaming case one way or the other. What it comes down to, is the Fed able to validate the market's dovishness here?" said Stephen Stanley, chief economist at Amherst Pierpoint. "The one thing that has characterized Fed communications over the last month or six weeks is they're just not willing to commit to anything ahead of time."
Hopes for a rate cut have sent bond yields lower and supported stocks this week. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite hit all-time highs. The tech sector rose more than 1% to a record as well, while the communications services sector surged more than 2%.
Economists say the markets would see a violent swing if Powell doesn't stay on track for a rate cut. The fed funds futures market is pricing in one full quarter point rate cut and a little more for July.
"I personally don't see the case for an ease right now," said Stanley. "Do they passively accept the market's verdict or do they push back, in that they're not fully on board with an ease right now? It would be easy to realign the market's expectations. Powell speaks next week and that would be the perfect opportunity if they were so inclined."
Stanley said such a move would upset the stock market and weaken financial conditions, something the Fed would not want to do. But there is not a unanimous view about interest rate moves on the Fed either. Cleveland Fed President Loretta Mester said this week that rates should be kept where they are for awhile. On the other hand, St. Louis Fed President James Bullard dissented at the June meeting because the Fed did not cut interest rates.
Diane Swonk, chief economist at Grant Thornton, said a change in tone from Powell would be disruptive and unlikely. "There are other people trying to figure out what is the right thing to do right now, and there's no easy answer," said Swonk. "Jay Powell has made up his mind, and he doesn't want to be on the wrong side of a recession."
Swonk said she expects the Fed to cut interest rates by a quarter point at the end of the month. "All you need is uncertainty. You've got that. You need inflation running low. You got that. You need wages not accelerating rapidly. You've got that," she said. "You've got all these things lining up."
Some economists expect a half point cut, but Swonk said that would be too much since the Fed does not really have a lot of ammunition, given that the fed funds rate range is 2.25 to 2.50%. "They want insurance, but they don't want to give away the house," she said.
Besides the Fed, investors will begin to think second quarter earnings season in the week ahead. Pepsico is a big name releasing its report Tuesday, ahead of the flood of reports from banks and others in the following week.
This past week saw the following moves in the S&P:
Major Indices for this past week:
Major Futures Markets as of Friday's close:
Economic Calendar for the Week Ahead:
Sector Performance WTD, MTD, YTD:
Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:
S&P Sectors for the Past Week:
Major Indices Pullback/Correction Levels as of Friday's close:
Major Indices Rally Levels as of Friday's close:
Most Anticipated Earnings Releases for next month:
Here are the upcoming IPO's for this week:
Friday's Stock Analyst Upgrades & Downgrades:
Jumbo First Half Gains Usually Continue After a Pause
The market just put on its best first half performance for the Dow since 1999, the S&P 500 since 1997 and NASDAQ since 2003 – and that's a pretty decent omen that market will tack on additional gains. Performance below following first-half Dow and S&P 500 gains greater than 7% and NASDAQ Composite gains greater than 10% shows a solid history of gains for the second half – after a tepid market action in Q3.
Modest gains of about 1% continue into July, but gains little ground during the rest of Q3, which should come as no surprise given the infamous negative history of August and September. On average the market was unable to match first half gains during the second, though the across-the-board 7+% gains over from July to December is still solid. The Dow's second half win ratio following jumbo gains like 2019 is a rather impressive 85.3% – S&P's win ration is 80.0%, NAS 73.9%. Full-year gains are virtual lock.
S&P 500 Sector Weightings: Mid-Year 2019
Below is an updated snapshot of S&P 500 sector weightings as of mid-year 2019. As shown, the Technology sector makes up the largest slice of the pie with a weighting of 21.48%. Health Care ranks as the second largest sector of the market at 14.20%, followed by Financials at 13.07%. The fact that technology and two service-oriented sectors making up nearly 50% of the index shows how much the US economy has shifted over the years. After the "big three" of Tech, Health Care, and Financials, we move down to Consumer Discretionary, Communication Services, and Industrials, which are all right around 10%. Consumer Staples has a weighting of 7.27%, and Energy is all the way down to 5.05% after years of losing share. Utilities, Real Estate, and Materials combine to add up to roughly 9% of the index, so these three sectors are basically immaterial at this point.
Below is a chart showing how much weightings changed in the first half of 2019. The Technology sector gained 1.33 percentage points while Health Care lost 1.23 percentage points, so the gap between the biggest sector (Tech) and the 2nd biggest sector (Health Care) widened by more than 2.5. Consumer Discretionary, Industrials, Real Estate, Materials, and Communication Services all gained share in the first half as well, while Energy, Financials, Consumer Staples, and Utilities all lost share along with Health Care.
Most Heavily Shorted S&P 500 Stocks
Below is a list of the 29 stocks in the S&P 500 that have more than 10% of their share float sold short. Luxury retailer Nordstrom (JWN) currently tops the list with 22% of its float sold short. The stock is down 33.86% YTD and 55% from levels seen last November.
Tax-prep company H&R Block (HRB) is the second most heavily shorted stock with 20.55% of its float sold short. HRB is followed by sports retailer Under Armour (UAA), Snap-On (SNA), and Kohl's (KSS). While JWN and KSS are both down big YTD, HRB, UAA, and SNA are all up nicely on the year.
There are plenty of other notables on the list, including Macy's (M), Campbell Soup (CPB), TripAdvisor (TRIP), Gap (GPS), Western Union (WU), and Foot Locker (FL), but one common characteristic among many of them is that they are retailers.
On average, these stocks with 10%+ short interest as a percentage of float are up 8.5% on the year, which is well below the 17% gain that the S&P 500 has seen.
Below we have input the list of heavily shorted stocks into a custom portfolio that Bespoke members can create when they're logged into our website. We've sorted the list by our algo-driven "Trend" and "Timing" scores. There are currently four stocks on the list that are in Bespoke "uptrends" with "good" timing scores -- Under Armour (UAA), Intl Flavors & Fragrances (IFF), Campbell Soup (CPB), and Coty (COTY).
Yield Curve Craters
With the 10-year plummeting below 2% again and the 3-month yield spiking up by over 7 basis points (bps), which is its biggest one day gain since December 2017, the yield curve is cratering today. Today's 11 bps move further into inverted territory is the biggest one-day move since January 2nd (see second chart). While not back at new lows, today marks the 29th day that the curve has now been inverted. In Fedspeak news, Cleveland Fed President Loretta Mester (who leans hawkish but isn't a voter) just noted in a speech that she's in no hurry to cut. She argues that "Cutting rates at this juncture could reinforce negative sentiment about a deterioration in the outlook even if this is not the baseline view, and could encourage financial imbalances given the current level of interest rates, which would be counterproductive."
What would cause her to change her stance? "If I see a few weak job reports, further declines in manufacturing activity, indicators pointing to weaker business investment and consumption, and declines in readings of longer-term inflation expectations, I would view this as evidence that the base case is shifting to the weak-growth scenario." A few weak job reports? In other words, she is in no hurry to take any action. Keep in mind, though, that as recently as late February, Mester was still of the view that the FOMC would need to be raising rates later on this year.
Happy Birthday, And Another Record Goes Down
"If you're looking for something to discuss at your barbecue while watching fireworks, be sure to mention this is now the oldest economic cycle in history at 121 months old," explained LPL Senior Market Strategist Ryan Detrick. That's right, this cycle just topped the previous record of 120 months from the 1990s technology boom.
Although 10 years might sound old, keep in mind that developed markets tend to have longer cycles of economic growth. "Is 10 years really that old for an expansion? Maybe not, as Australia hasn't had a recession for nearly 28 years," according to Detrick. "Not to mention Canada, the U.K., Spain, and Sweden, which all have had at least 15 years of growth starting in the early 1990s and ending in 2008. Going even further back we see that France, Germany, the Netherlands, Norway, South Korea, Ireland, and China have all had at least 15-year-plus expansions since World War II."
Emerging countries tend to see more of a boom-and-bust type of cycle while more developed nations can have longer-lasting periods of growth. In fact, it's plausible that the United States could have avoided a recession in 2001 if the 9/11 attacks had not happened, which would have produced a nearly 17-year expansion. So maybe 10 years isn't so old?
As our LPL Chart of the Day, This Is Now The Longest Expansion Ever, shows, this is now the longest expansion ever. Additionally, over the decades as the United States turned into a developed nation, the cycles of growth tended to last longer. Thanks to the dual benefits of fiscal and monetary policy, we continue to expect this current cycle to have potentially years of growth left.
STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending July 5th, 2019
([CLICK HERE FOR THE YOUTUBE VIDEO!]())
(VIDEO NOT YET UP!)
STOCK MARKET VIDEO: ShadowTrader Video Weekly 07.7.19
Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-
- $PEP
- $DAL
- $AZZ
- $BBBY
- $LEVI
- $FAST
- $MSM
- $INFY
- $LNN
- $ANGO
- $WDFC
- $HELE
- $NTIC
- $PSMT
- $AIR
- $EXFO
- $SLP
- $SAR
- $ASPU
- $YRD
Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:
Monday 7.8.19 Before Market Open:
Monday 7.8.19 After Market Close:
([CLICK HERE FOR MONDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())
NONE.
Tuesday 7.9.19 Before Market Open:
Tuesday 7.9.19 After Market Close:
Wednesday 7.10.19 Before Market Open:
Wednesday 7.10.19 After Market Close:
Thursday 7.11.19 Before Market Open:
Thursday 7.11.19 After Market Close:
([CLICK HERE FOR THURSDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())
NONE.
Friday 7.12.19 Before Market Open:
Friday 7.12.19 After Market Close:
([CLICK HERE FOR FRIDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())
NONE.
PepsiCo, Inc. $133.02
PepsiCo, Inc. (PEP) is confirmed to report earnings at approximately 6:10 AM ET on Tuesday, July 9, 2019. The consensus earnings estimate is $1.49 per share on revenue of $16.42 billion and the Earnings Whisper ® number is $1.53 per share. Investor sentiment going into the company's earnings release has 69% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 7.45% with revenue increasing by 2.05%. Short interest has decreased by 1.2% since the company's last earnings release while the stock has drifted higher by 6.4% from its open following the earnings release to be 12.8% above its 200 day moving average of $117.92. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, July 2, 2019 there was some notable buying of 1,487 contracts of the $130.00 put and 1,470 contracts of the $130.00 call expiring on Friday, August 16, 2019. Option traders are pricing in a 2.4% move on earnings and the stock has averaged a 2.6% move in recent quarters.
Delta Air Lines, Inc. $58.70
Delta Air Lines, Inc. (DAL) is confirmed to report earnings at approximately 7:00 AM ET on Thursday, July 11, 2019. The consensus earnings estimate is $2.30 per share on revenue of $12.35 billion and the Earnings Whisper ® number is $2.33 per share. Investor sentiment going into the company's earnings release has 82% expecting an earnings beat The company's guidance was for earnings of $2.05 to $2.35 per share. Consensus estimates are for year-over-year earnings growth of 29.94% with revenue increasing by 4.88%. Short interest has increased by 5.7% since the company's last earnings release while the stock has drifted lower by 0.5% from its open following the earnings release to be 9.8% above its 200 day moving average of $53.48. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, June 20, 2019 there was some notable buying of 4,211 contracts of the $60.00 call expiring on Friday, September 20, 2019. Option traders are pricing in a 3.3% move on earnings and the stock has averaged a 2.5% move in recent quarters.
AZZ Inc. $46.10
AZZ Inc. (AZZ) is confirmed to report earnings at approximately 6:30 AM ET on Monday, July 8, 2019. The consensus earnings estimate is $0.71 per share on revenue of $285.70 million. Investor sentiment going into the company's earnings release has 56% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 18.33% with revenue increasing by 8.95%. Short interest has increased by 81.1% since the company's last earnings release while the stock has drifted higher by 6.7% from its open following the earnings release to be 2.5% above its 200 day moving average of $44.99. Option traders are pricing in a 8.4% move on earnings and the stock has averaged a 7.5% move in recent quarters.
Bed Bath & Beyond, Inc. $11.47
Bed Bath & Beyond, Inc. (BBBY) is confirmed to report earnings at approximately 4:15 PM ET on Wednesday, July 10, 2019. The consensus earnings estimate is $0.08 per share on revenue of $2.58 billion and the Earnings Whisper ® number is $0.08 per share. Investor sentiment going into the company's earnings release has 38% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 75.00% with revenue decreasing by 6.31%. Short interest has increased by 20.8% since the company's last earnings release while the stock has drifted lower by 32.8% from its open following the earnings release to be 20.1% below its 200 day moving average of $14.36. Overall earnings estimates have been revised higher since the company's last earnings release. On Tuesday, July 2, 2019 there was some notable buying of 21,114 contracts of the $10.00 put expiring on Friday, July 19, 2019. Option traders are pricing in a 18.1% move on earnings and the stock has averaged a 13.8% move in recent quarters.
Levi Strauss & Co. $22.27
Levi Strauss & Co. (LEVI) is confirmed to report earnings at approximately 4:05 PM ET on Tuesday, July 9, 2019. The consensus earnings estimate is $0.14 per share on revenue of $1.31 billion and the Earnings Whisper ® number is $0.15 per share. Investor sentiment going into the company's earnings release has 69% expecting an earnings beat. The stock has drifted lower by 4.1% from its open following the earnings release. The stock has averaged a 4.0% move on earnings in recent quarters.
Fastenal Co. $32.09
Fastenal Co. (FAST) is confirmed to report earnings at approximately 6:50 AM ET on Thursday, July 11, 2019. The consensus earnings estimate is $0.37 per share on revenue of $1.38 billion and the Earnings Whisper ® number is $0.38 per share. Investor sentiment going into the company's earnings release has 57% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 50.00% with revenue increasing by 8.84%. Short interest has increased by 85.0% since the company's last earnings release while the stock has drifted lower by 52.5% from its open following the earnings release to be 5.7% above its 200 day moving average of $30.36. Overall earnings estimates have been revised lower since the company's last earnings release. On Monday, June 24, 2019 there was some notable buying of 2,003 contracts of the $25.00 put expiring on Friday, January 15, 2021. Option traders are pricing in a 5.1% move on earnings and the stock has averaged a 6.7% move in recent quarters.
MSC Industrial Direct Co. Inc. $73.95
MSC Industrial Direct Co. Inc. (MSM) is confirmed to report earnings at approximately 6:30 AM ET on Wednesday, July 10, 2019. The consensus earnings estimate is $1.50 per share on revenue of $881.83 million and the Earnings Whisper ® number is $1.49 per share. Investor sentiment going into the company's earnings release has 62% expecting an earnings beat The company's guidance was for earnings of $1.46 to $1.52 per share on revenue of $874.00 million to $891.00 million. Consensus estimates are for year-over-year earnings growth of 7.91% with revenue increasing by 6.46%. Short interest has increased by 1.5% since the company's last earnings release while the stock has drifted lower by 6.9% from its open following the earnings release to be 9.0% below its 200 day moving average of $81.24. Overall earnings estimates have been revised lower since the company's last earnings release. On Thursday, June 27, 2019 there was some notable buying of 510 contracts of the $75.00 call expiring on Friday, July 19, 2019. Option traders are pricing in a 7.2% move on earnings and the stock has averaged a 3.4% move in recent quarters.
Infosys Technologies Ltd. $10.69
Infosys Technologies Ltd. (INFY) is confirmed to report earnings at approximately 8:05 AM ET on Friday, July 12, 2019. The consensus earnings estimate is $0.13 per share on revenue of $3.09 billion and the Earnings Whisper ® number is $0.14 per share. Investor sentiment going into the company's earnings release has 66% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 51.85% with revenue increasing by 9.15%. Short interest has increased by 17.2% since the company's last earnings release while the stock has drifted higher by 0.8% from its open following the earnings release to be 2.2% above its 200 day moving average of $10.45. Overall earnings estimates have been revised lower since the company's last earnings release. Option traders are pricing in a 9.1% move on earnings and the stock has averaged a 4.3% move in recent quarters.
AngioDynamics $20.43
AngioDynamics (ANGO) is confirmed to report earnings at approximately 7:00 AM ET on Wednesday, July 10, 2019. The consensus earnings estimate is $0.25 per share on revenue of $92.85 million. Investor sentiment going into the company's earnings release has 64% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 25.00% with revenue increasing by 5.13%. Short interest has decreased by 8.7% since the company's last earnings release while the stock has drifted lower by 12.2% from its open following the earnings release to be 2.9% below its 200 day moving average of $21.03. Overall earnings estimates have been revised lower since the company's last earnings release. Option traders are pricing in a 8.9% move on earnings and the stock has averaged a 7.6% move in recent quarters.
Lindsay Manufacturing Co. $83.06
Lindsay Manufacturing Co. (LNN) is confirmed to report earnings at approximately 6:45 AM ET on Tuesday, July 9, 2019. The consensus earnings estimate is $0.81 per share on revenue of $136.87 million and the Earnings Whisper ® number is $0.81 per share. Investor sentiment going into the company's earnings release has 23% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 51.20% with revenue decreasing by 19.28%. Short interest has increased by 26.9% since the company's last earnings release while the stock has drifted lower by 0.3% from its open following the earnings release. Overall earnings estimates have been revised lower since the company's last earnings release.
DISCUSS!
What are you all watching for in this upcoming trading week ahead?
I hope you all have a fantastic weekend and a great trading week ahead r/StockMarket!
![[link]](https://i.redd.it/jxc52n2xkp831.png){kind=link}
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