S&P 500 Poised to Break into Bear Market Territory; Weaker Dollar Key to Turning Stockmarket Around

U.S. stock index futures are edging lower on Monday, shortly before the cash market opening as traders brace for more selling pressure. The weakness is being fueled by worries that the Federal Reserve’s aggressive push to curb inflation may tip the American economy into recession.

At 12:23 GMT, the blue chip Dow Jones Industrial Average is trading 29462.00, down 207.00 or -0.70%. The benchmark S&P 500 Index is at 3678.15, down 30.25 or -0.82% and the tech-heavy NASDAQ Composite is at 11296.15, down 80.00 or -0.70%.

Weakening investor sentiment is being fueled by surging global interest rates and turmoil in the foreign currency markets.

S&P 500 Breathing on Bear Market Low

In the cash market, investors will be closely watching the S&P 500 for any break below its bear market low. The S&P’s low close for the year in June was 3,666.77. It closed Friday at 3,693.23 after trading briefly below that close. The benchmark’s intraday low for the year is 3636.87. Any trade below those levels could drive more selling in the market.

Tumultuous Forex Trade Could Create Havoc for Stocks

The British Pound plunged to a record low on Monday against the U.S. Dollar. Sterling at one point fell to an all-time low of $1.0382. The move is being fueled by a combination of the Federal Reserve’s aggressive hiking campaign and last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.

The consensus doesn’t believe there will be a currency intervention on the Sterling, but the onus is now on the central bank to do more to tight policies to stabilize the British Pound.

Unless there is severe financial distress due to the weakening currency, the Bank of England will wait until its next meeting to show decisive action to raise rates aggressively in the next couple of meetings.

Cyclical Stocks Trading Lower on Worries Over Fed-Driven Recession

In premarket trading on Monday, cyclical stocks traded convincingly lower on worries that a series of sharp interest rate hikes by the Fed could rattle the economy.

Boeing Co, Chevron Corp, Caterpillar Inc and JPMorgan Chase & Co fell more than 1% each, while growth stocks including Apple Inc, Microsoft Corp, Amazon.com Inc and Tesla Inc shed between 0.4% and 0.5%.

Short-Term Outlook

Going into today’s trading session, I believe investors should be focused on the U.S. Dollar. It’s hard not to have concerns about long-term stock market performance with the dollar accelerating, global yields soaring and the breakdowns across the global FX.

However, a concerted effort by the major central banks to bring the U.S. Dollar could trigger a dramatic reversal in equity prices.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 (SPY) Dives To 3850 As FedEx Report Highlights Recession Risks

Key Insights

  • The disappointing report from FedEx put significant pressure on S&P 500 today. 
  • Treasury yields keep moving higher, which is bearish for stocks. 
  • A move below 3850 will push S&P 500 towards the next support level at 3825.

S&P 500 Remains Under Strong Pressure Ahead Of The Weekend

S&P 500 moved towards the 3850 level after a disappointing FedEx fiscal Q1 report. The report missed analyst estimates. In addition, FedEx withdrew its fiscal year 2023 earnings forecast, which was provided on June 23, 2022.

FedEx noted that “results were particularly impacted by macroeconomic weakness in Asia and service challenges in Europe, leading to a revenue shortfall in this segment of approximately $500 million relative to company forecasts.”

FedEx stock is down by 22% in today’s trading session. United Parcel Service stock has also found itself under material pressure.

The FedEx report boosted worries about a global recession. Not surprisingly, consumer cyclical stocks have found are losing ground today. Packaging Corporation of America and International Paper Company are down by more than 11%.

Other notable losers include General Electric, which is down by 5%, and Boeing, which is down by 4% in today’s trading.

Meanwhile, Treasury yields keep moving higher as traders remain nervous ahead of the Fed meeting. Higher yields are bearish for tech stocks, which are moving lower. Meta managed to settle below the $150 level and is testing yearly lows near the $146 level. Amazon stock is down by 3% today.

S&P 500 Tests Support At 3950

S&P 500

S&P 500 managed to settle below the support at 3885 and is testing the next support level at 3850. In case this test is successful, S&P 500 will move towards the next support level, which is located at 3825. A move below 3825 will push S&P 500 towards the support at 3800. If S&P 500 declines below this level, it will head towards the next support at 3780.

On the upside, the previous support level at 3885 will serve as the first resistance level for S&P 500. In case S&P 500 manages to settle back above 3885, it will head towards the resistance at 3900. A successful test of the resistance at 3900 will push S&P 500 towards the next resistance level at 3920.

For a look at all of today’s economic events, check out our economic calendar.

S&P 500 Holds Close to Last Friday’s Highs Above 4,100; Boeing Shares Jump 6.0%

Key Points

  • Major US indices are ever so slightly in the red on Monday as investors digest weak US manufacturing data.
  • While contributing to recession fears, the data also pointed to a welcome slowdown in inflationary pressures.
  • The energy sector was the underperformer, whilst Boeing shares shot higher.

Major Indices Experience Modest Pullback

Major US equity indices stabilized slightly below Friday’s closing levels after hitting fresh multi-week highs midway through the session amid choppy, two-way trading conditions. The latest batch of tier 1 US data, the July ISM Manufacturing PMI survey, showed growth in the US industrial sector falling to its weakest in over two years and forward-looking components like the New Orders subindex falling further into contractionary territory.

This exacerbated concerns that the US economy is either already in, or on the verge of slipping into, a recession. But, more optimistically, ISM’s prices paid subindex, which is a gauge of the inflationary pressures faced by manufacturers, saw a substantial dip in July to its lowest level in two years, a sign that inflation in the US has probably peaked for now.

Taken together, evidence of a weakening economy as well as falling inflationary pressures suggests that, as markets have started betting on in recent weeks, the US Federal Reserve won’t need to be as aggressive with rate hikes in the coming quarters. While some traders were clearly taking profit after US equities closed out their strongest month since 2020 last week, optimism about a more benign Fed tightening outlook is for now keeping the bears away.

The S&P 500 was last down about 0.25% in the 4,120 area, having come close to hitting 4,150 earlier in the day, with the bulls still eyeing a test of early June’s highs in the 4,170s. The Nasdaq 100 index, meanwhile, was briefly able to rally above the 13,000 level for the first time since early May, but has since slipped back to trade in the 12,900s. The Dow came within a whisker of hitting 33,000, but has since dropped back to trade broadly flat just above 32,800.

Equity investors are looking ahead to the release of US jobs data for July on Friday, which is likely to show that the US labor market remains healthy, albeit cooling off somewhat.

Energy Sector Lags As Oil Prices Drop, Boeing Shares Leap

A sharp drop in global oil prices on weak global manufacturing PMI survey data (out of the Eurozone, UK, China and Japan as well as the US) amid concerns about the demand outlook weighed heavily on the S&P 500’s energy GICS sector, which dropped nearly 2.0%. The index has thus handed back a substantial portion of last Friday’s 4.5% jump that was at the time driven by record-setting Exxon Mobil and Chevron quarterly earnings.

In terms of the other sector, most were also in the red, though to a lesser degree than energy, with just Consumer Staples (+1.2%), Industrials (+0.2%) and Consumer Discretionary (+0.6%) in the green. In terms of major individual stock stories, Boeing’s share price leapt to its highest levels since late April on a Reuters report that the US aviation regulator had approved Boeing’s inspection and modification plan that would allow it to resume deliveries of its 787 Dreamliner jet.

Why Boeing Stock Is Down By 4% Today

Key Insights

  • Boeing 737-800 crashed in China with 132 people on board.
  • Not surprisingly, the company’s shares are losing ground in today’s trading session.
  • Earnings estimates keep moving lower, and the stock will need additional positive catalysts to break the current downside trend. 

Boeing Stock Is Under Pressure After A Fatal Crash In China

Shares of Boeing found themselves under pressure after Boeing 737-800 crashed in China. The aircraft belonged to China Eastern Airlines and carried 132 people on board. China Eastern Airlines has decided to ground all of the company’s 737-800 planes.

Previously, Boeing had significant problems with 737 MAX in China. After two crashes, China grounded the plane for more than two and a half years.

China Eastern Airlines’ plane was not a 737 MAX, which will likely limit the stock’s downside in the near term. However, the market will likely remain extremely sensitive to any news about the ongoing investigation.

What’s Next For Boeing Stock?

Analyst estimates for Boeing have been moving lower in recent weeks. Currently, analysts expect that Boeing will report earnings of $3.02 per share in 2022 and $7.38 per share in 2023, so the stock is trading at roughly 25 forward P/E for 2023.

The company faced several strong headwinds this year, including high commodity prices and sanctions on Russia, which forced Boeing to cut ties with airlines and suppliers in the country.

However, it remains to be seen whether the crash of the Boeing 737-800 will serve as a longer-term catalyst for the company’s shares. Unless the investigation finds any problems that could be viewed as systemic, the market will likely view the crash as a separate incident.

At the same time, it should be noted that Boeing stock is not that cheap at current levels, so it may need additional catalysts to break the current downside trend.

For a look at all of today’s economic events, check out our economic calendar.

Best Stocks, Crypto, and ETFs to Watch – Visa, Dollar Tree, Bitcoin in Focus

Stocks

Visa Inc. (V) and Mastercard Inc. (MA) sold off last week, battered by projected revenue losses as a result of Russian sanctions. Both companies suspended operations in the rogue state over the weekend, setting the stage for additional losses when equity markets open on Monday. The stocks have lost more than 15% in recent weeks and are testing December 2021 lows that may not hold, given additional losses from reduced international travel, despite the pandemic’s retreat.

ABM Industries Inc. (ABM) is New York-based mid cap that provides cleaning and management services for large buildings in the United States and United Kingdom. That’s good news in a troubled world that’s punishing blue chips with exposure to mainland Europe and Russia. The stock broke out above 4-year resistance in early 2021 and posted an all-time high at 55.48 one year ago, ahead of a correction that bounced at breakout support in December. It’s now rallied into a trendline of lower highs, just in time for Thursday’s earnings report.

Dollar Tree Inc. (DLTR) incurred the wrath of the mainstream media after 400 stores were closed due to rat infestations. However, the stock has risen to the top of the Nasdaq-100 performance list at the same time, highlighting domestic exposure in a US economy that will suffer as a result of war in Europe. The stock rallied within a point of November 2021’s all-time high after a mixed earnings report on Wednesday and could breakout in coming weeks.

ETFs

iShares Dow Jones US Aerospace and Defensive Index ETF (ITA) broke out above an 8-month trendline of lower highs one week ago and reversed near the 2021 high at 113.13. A 19% surge in Lockheed Martin Corp (LMT) underpinned the uptick while Boeing Co.’s (BA) 18.53% weighting kept a lid on gains because it’s losing ground due to Russian exposure and the war’s economic impact. However, half of BA revenue is booked through defense applications that will generate windfall profits in coming years.

Crypto

Bitcoin (BTC) and other cryptocurrencies have disappointed long-side traders since the outbreak of the war, with a quick buying spike consumed by an immediate decline that now threatens to test and break January and February lows. The digital currency footprint hasn’t been heavy enough to mark an important funding source during the conflict while physical commodities, including gold and silver, have posted impressive gains.

Catch up on the latest price action with our new ETF performance breakdown.

 Disclosure: the author held Lockheed-Martin, Aerospace & Gold ETFs, Boeing, and Visa in family accounts at the time of publication. 

In The Spotlight – Big Wall Street Banks as the Main Power in S&P 500

Banks’ earnings

Big Wall Street banks are in the spotlight right out of the gate with Goldman Sachs set to release results before markets open. They will be followed by Bank of America, Morgan Stanley, and U.S. Bancorp tomorrow (Wednesday). Bank results got off to a mixed start on Friday. JPMorgan Chase, Citigroup, and Wells Fargo all topped profit estimates for Q4 but JPMorgan and Citi delivered disappointments in other areas.

In particular, investors are nervous about higher expenses that cut into Q4 profits for both JPMorgan and Citi and which both banks forecast would continue to weigh on results in 2022. JPMorgan and Citi also saw -11% decreases in trading revenue, with fixed income trading down by double digits for both.

There are also signs of slowing loan growth that some analysts worry is an early sign of slowing consumer demand for big-ticket items as inflation continues to climb. While banks will eventually benefit from higher U.S. interest rates that are anticipated in the year ahead, a big pullback in consumer lending is a threat to some of the more lofty Wall Street expectations had for the sector in 2022.

Global economy

Globally, not a lot changed over the extended weekend. China might have provided a bit of a surprise with additional monetary easing into a struggling GDP and sagging real estate prices. It’s worth noting, Omicron has now been detected in Beijing for the first time, just three weeks before the city is due to host the Winter Olympics. Now the Chinese are shutting down and suspending the sale of Olympic tickets to the public.

Tensions remain heated between Hong Kong activists and Chinese government officials. North Korea launched its fourth missile test this month. After North Korea’s missile test last week, the US announced sanctions on eight North Korean and Russian individuals and entities for supporting North Korea’s ballistic missile programs.

Tensions between the U.S. and Russia seem to be headed in the wrong direction with Russia over the weekend moving troops and equipment into Belarus for joint military exercises.

The so-called “Allied Resolve” drills are set to take place near borders with NATO members Poland and Lithuania, as well as Ukraine where Russia has maintained its alarming military presence.

Most U.S. military experts don’t really think Russia has any real intentions of invading Ukraine or any other EU country. However, Western countries also have increased their military presence along borders and other strategic locations which increases the chances that a broader conflict could “accidentally” be sparked.

Europe’s gas supplies are also at risk as Russia continues to dangle the threat of cutting them off. Most of the tension stems from Russia’s demand that former Soviet countries be barred from entering NATO, something the U.S. and other NATO allies have refused.

In the USA, we are heading deeper into earnings season and investors are going to be paying close attention to costs and expenses. As I mentioned, late last week, JPMorgan warned that higher expenses and higher spending on hiring in 2022 could create some headwinds.

Looking ahead, it will be interesting to see how many executive teams start providing guidance and warnings that corporate expenses are rising faster than anticipated and what if any damage will be due to profit margins?

Remember, some companies have said they are passing the additional rising costs on to the consumer while other companies are eating a majority of the higher expenses in an attempt to gain more market share.

How the stock market decides to differentiate the strategy and style could greatly impact money flow and valuations. Goldman Sachs, J.B. Hunt, Charles Schwab, Citrix, Concentrix, and Interactive Brokers report earnings today.

Data to watch

Tomorrow we have Alcoa, Bank of America, Kinder Morgan, Morgan Stanley, Procter & Gamble, and United Airlines.

Thursday we have American Airlines, Baker Hughes, Netflix, and Union Pacific.

Then next week we have big names like Apple, Boeing, Caterpillar, McDonalds, Microsoft and Verizon reporting earnings.

Let’s also not forget next week we have the first Fed FOMC meeting of the new year.

With the U.S. Federal Reserve getting ever closer to implementing its first rate hikes, which most anticipate will begin in March, investors are growing less enchanted with some of the high-growth and momentum stocks that saw outsized share price gains last year.

This trend is most evident in the tech-heavy Nasdaq where nearly half of the index’s stocks have fallen by -50% from their recent peaks. The Nasdaq itself is only down by about -7% from its most recent record high. The selloff has been very much concentrated in highly-leveraged companies that have yet to deliver a profit, as the prospect of higher rates reduce future profit potential. Earnings results from these high-fliers will likely be harshly scrutinized as Wall Street tries to separate the “wheat from the chaff,” so to speak.

On the economic data front, Empire State Manufacturing and the NAHB Housing Market are today’s highlights.

For a look at all of today’s economic events, check out our economic calendar.

Best Stocks to Watch in 2022

International Business Machines Corp. (IBM) has been losing ground for nearly eight years, plagued by poor management and aggressive competition. The old school tech behemoth took a giant leap forward in November, splitting off slower performing divisions into Kyndryl Holdings Corp. (KD). That stock has dropped like a rock since coming public, as it should, while the slimmed-down IBM has gained a modest 2%. Those gains should accelerate in 2022, with a rally above 155 signaling the first uptrend since 2013.

Visa Inc. (V) transactions surge when folks travel and spend their hard-earned dollars, euros, and shekels on airlines, hotels, and expensive meals. The Delta and Omicron variants have kept most of us closer to home in 2021, making the fintech’s quarterly earnings far less reliable. The stock whipped back and forth as a result, yielding this year’s nearly flat annual return.  Look for much stronger 2022 stock performance as massive immunity and a wave of new COVID drugs herald a return to normal around the world.

Boeing Co. (BA) rallied in 2020 when the U.S. government allowed the troubled 737 MAX jetliner to return to the friendly skies. However, supply chain disruptions and the pandemic weighed on the stock throughout 2021, yielding a zero return just like Visa.  2022 should generate much stronger gains for long-suffering shareholders, especially with the stock now sitting on 9-month support at 200. Better yet, it could double in price in the next two or three years, returning to lofty 2019 levels.

Roku Inc. (ROKU) is the most controversial entry on this 2022 watch list after a horrible year, in which the streaming provider has fallen a gut-wrenching 32%. Worse yet, the stock price has been cut in half since posting an all-time high less than five months ago. However, Roku could pick up the pieces in the fragmented streaming space, giving confused cord-cutters a single piece of hardware to collate dozens of free and paid services.

Cryptocurrencies have emerged as speculative vehicles of choice for the Millennial generation, but gold and SPDR Gold Trust (GLD) could shine brightly in 2022, breaking out above decade-long resistance at 200. The fund tested that level in July 2020 and pulled back, spending all of 2021 carving the potential handle in a massive cup and handle pattern. A rally above 175 will set off preliminary buying signals in this configuration, setting the stage for an historic breakout.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held Visa in a family account at the time of publication. 

Boeing Testing January Support

Dow component Boeing Co. (BA) has been testing January support between 190 and 200 since Omicron hit the newswires on Black Friday. The resiliency, at least to this point, reflects optimism the next pandemic wave will be mild, allowing the travel industry to book decent numbers over the holiday season and into the first quarter of 2022.  Of course, a lot could change in the next week or two but a strong bounce here might offer a profitable entry for risk tolerant investors.

MAX Returning to Service in China

Multiple news outlets reported on Thursday that China’s aviation authority has finally issued an airworthiness certificate for the troubled 737 MAX jetliner. In turn, this sets the stage for a return to service in the Asian nation after more than 2½ years of grounding.  Industry experts now estimate that flights will resume by the end of the year or early 2022. This is a big deal because Chinese airlines comprise around 25% of Boeing’s annual MAX production.

Wells Fargo analyst Matthew Akers upgraded Boeing to ‘Overweight’ just before the Omicron news, noting positive risk/reward balance, with the stock lagging the SP-500 by 30% since March. He further outlines his bullish view, insisting “we now see limited downside as BA has de-risked 2022 delivery expectations and is less susceptible to supply chain disruption given its large inventory of completed aircraft. BA is most levered to the post-COVID recovery among our coverage, and should outperform as air travel continues to normalize.”

Wall Street and Technical Outlook

Wall Street consensus has improved in the last three months, now standing at an ‘Overweight’ rating based upon 14 ‘Buy’, 4 ‘Overweight’, and 4 ‘Hold’ recommendations. However, three analysts still recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $164 to a Street-high $306 while the stock is set to open Monday’s session about $72 below the median $271 target.

Boeing broke a two-year top with support near 300 in the first quarter of 2020 and sunk to a 6-year low in March. The subsequent uptick topped out in March 2021 after recouping half of the 357 point downside and settled into a channeled decline that’s now flirting with an 11-month low. Accumulation, as measured by On Balance Volume (OBV), has dropped to the lowest reading since August 2020 when the stock was trading near 160. Taken together with mixed relative strength readings, sellers are likely to retain control into year’s end.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Boeing Sees Growth in the Freighter Markets

The pandemic affected Boeing’s business, but the company is now seeing growth in the freight markets and intends to double down on it.

Boeing Exec Hypes the Freight Market

Stan Deal, executive vice president of Boeing, has revealed that the company sees real growth in the freighter market. He revealed this during an interview with CNBC earlier today as the company begins to recover from the pandemic.

He told CNBC’s Dan Murphy at the Dubai Air Show that cargo now plays an important role in the aerospace industry. He stated that “The freighter markets are on fire right now. That’s where we see real growth.”

The company’s business has been affected by the Coronavirus pandemic, which saw flights to all parts of the world canceled for more than a year. The Boeing exec said the company is recovering from the pandemic and expects to receive more orders before the end of 2021.

Deal said, “Well, we’ve had a good year so far. We’ve booked about 309 new orders net this year, 720 gross. That’s a pretty good start. And those discussions are continuing at this air show. It’s not over, we expect more orders before the year-end. And that will position well into 2022.”

Boeing is on track to add three conversion lines for its 737-800BCF across Europe and North America. They are facilities that convert aircraft to freighters, and they’ll be located at London Gatwick and KF Aerospace in Canada.

BA stock chart. Source: FXEMPIRE

BA Could Rally Towards $240

The shares of Boeing have been rallying since the company announced it is in advanced talks to sell a cargo version of its future 777X jetliner. Deal’s comments earlier today gave investors more reasons to be bullish on BA.

At press time, BA is up by more than 5% since the US market opened earlier today and is trading at $232 per share. If the rally continues, then BA could make a move for the $240 region over the coming days and weeks.

Best Stocks, Crypto, and ETFs to Watch This Week – Disney, Boeing, Shiba Inu and IWM ETF In Focus

Walt Disney Co. (DIS)

Walt Disney Co. (DIS) highlights this week’s earnings calendar, with analysts expecting a profit of just $0.51 per-share on $18.77 billion in revenue. The stock has struggled so far in 2021, posting a 4% year-to-date loss, compared to 2020’s healthy 26% return. The slow pick-up of box office, advertising, and theme park revenue has impacted profits but slowing growth and high churn at the Disney+ streaming service is weighing most heavily on investor sentiment.

Boeing Co. (BA)

Boeing Co. (BA) rallied off a deep low near 200 this week, hopefully carving the last leg of a bullish triple bottom after Pfizer Inc. (PFE) announced a promising oral treatment for COVID-19 patients. The pandemic’s biggest losers shot higher in unison, with high hopes the drug will put an end to government restrictions and encourage business travelers to return to the friendly skies. The aerospace giant will issue a buy signal if it can now break out above descending trendline resistance near 227.

Shiba Inu Coin

Shiba Inu dropped into the 11th slot in cryptocurrency market cap last week, turning lower after posting an all-time high at 0.00008870 in Oct. 28. A 28% bounce on Friday ended a selling wave triggered by $42.3 billion token sale but the coin may need another leg down to attract the buy-the-dip crowd. For now, traders should focus their efforts at 50-day moving average support that’s now lifted to 0.0000375 because that’s where the big September breakout unfolded.

iShares Russell-2000 ETF (IWM)

iShares Russell-2000 ETF (IWM) broke out above a 10-month symmetrical triangle last week, lifting to an all-time high at 243.40 on Friday. It already feels like it’s too overbought to chase the uptick, suggesting late-to-the-party traders sit on their hands and wait for a pullback to new support between 230 and 234. Just keep in mind this index is best traded as a long-term position at the moment because small cap seasonality will remain highly positive until March 2022.

Wynn Resorts Ltd. (WYNN)

Wynn Resorts Ltd. (WYNN) has been battered and bruised in 2021, posting a 13% year-to-date loss, held hostage by pandemic crosswinds. It rallied into May and turned sharply lower as the Delta variant forced gamblers to forego visits to Las Vegas and Macao. Nevada revenue has come roaring back but Macao receipts continue to suffer, booking minus 40% year-over-year revenues in October, on top of minus 72% in the same month in 2020. The company reports Q3 results after Tuesday’s closing bell.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

S&P 500, Dow Gain Amid Inflation Concerns, Debt Ceiling Debate

The S&P 500 index and the Dow Jones Industrial Average advanced, but the Nasdaq Composite closed lower as Treasury yields halted their ascent. Defensive sectors took the lead as investors sought stability in the volatile market.

All three remain on course to post monthly declines, with the bellwether S&P 500 snapping a seven-month winning streak.

“The same story we’ve seen for a couple of weeks,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York.

“Investors are concerned about three things: the eventual taper of bond purchases by the Fed, ongoing inflation with Chairman Powell saying it’s going to stick around longer than initially expected, and the debt ceiling issue that congress is grappling with.”

Powell, speaking at a European Central Bank event, expressed frustration over persistent supply chain woes which could keep inflation elevated for longer than expected.

The stock market strengthened following his remarks.

“Powell has been very good at delivering the news officially that everyone knows is coming,” Pursche said.

Wrangling continued on Capitol Hill over funding the government as the Friday deadline to prevent a shutdown approached, with mounting concerns over a U.S. credit default.

U.S. Treasury yields paused after a runup in recent days as the debt ceiling debate unfolded in Washington.

The Dow Jones Industrial Average rose 90.73 points, or 0.26%, to 34,390.72; the S&P 500 gained 6.83 points, or 0.16%, at 4,359.46; and the Nasdaq Composite dropped 34.24 points, or 0.24%, to 14,512.44.

Of the 11 major sectors in the S&P 500, materials suffered the largest percentage drop, with utilities leading the way with a 1.3% gain.

Boeing Co provided the biggest lift to the Dow following China’s aviation regulator’s successful 737 MAX test. The planemaker’s shares rose 3.2%.

Discount retailer Dollar Tree Inc jumped 16.5% after increasing its buyback authorization by $1.05 billion to $2.5 billion.

Drugmaker Eli Lilly & Co gained 4.0% on Citigroup’s rating upgrade to “buy” from “neutral.”

Advancing issues outnumbered decliners on the NYSE by a 1.26-to-1 ratio; on Nasdaq, a 1.34-to-1 ratio favored decliners.

The S&P 500 posted seven new 52-week highs and two new lows; the Nasdaq Composite recorded 38 new highs and 151 new lows.

Volume on U.S. exchanges was 11.42 billion shares, compared with the 10.45 billion average over the last 20 trading days.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stephen Culp; Additional reporting by Devik Jain in Bengaluru; Editing by Richard Chang)

Boeing Trading Higher After Bernstein Upgrade

Dow component Boeing Co. (BA) is trading higher by nearly 3.0% in Wednesday’s pre-market after Bernstein upgraded the aerospace giant from ‘Market Perform’ to ‘Outperform’. Analyst Douglas Harned also raised the firm’s price target from $252 to $279, just above the median of 24 analysts covering the stock. The long anticipated travel rebound drove the upgrade, even though most corporations have delayed plans to resume business travel due to the Delta variant.

MAX Flights Awaiting Chinese Approval

In addition, the company hopes to receive approval from Chinese authorities to resume MAX 737 flights after that nation’s aviation regulator conducted a successful test flight last month. Company spokesman Sherry Carbary recently sounded upbeat, noting she was “encouraged about how closely they are working with us” while U.S. Commerce Secretary Gina Raimondo took a more pessimistic stance, complaining that China is standing in the way of “tens of billions of dollars” in domestic purchases.

Boeing has underperformed the Dow Jones Industrial Average by a wide margin so far in 2021, posting a mediocre 4.5% return when Wednesday’s pre-market gains are added, compared to the Dow’s 12% return. The stock has also been rangebound and grinding sideways at the 200-day moving average for nearly 11 months, highlighting a holding pattern that reflects ongoing uncertainty about the pandemic’s long-term impact on business and recreational travel.

Wall Street and Technical Outlook

Wall Street consensus is mixed, yielding an ‘Overweight’ rating based upon 11 ‘Buy’, 3 ‘Overweight’, and 8 ‘Hold’ recommendations. In addition, two analysts recommend that shareholders close positions. Price targets currently range from a low of $191 to a Street-high $314 while the stock will open Wednesday’s session more than $50 below the median $277 target. That price level matches the top of the 2021 trading range but is unlikely to be reached in the next six months due to fears of a winter wave.

Boeing sold off more than 350 points between March 2019 and March 2020, pounded to dust by the MAX 737 grounding and first pandemic wave. It recovered just half of that downside into the March 2021 peak at 278.57 and rolled into a pattern of lower highs and lower lows that have found support near 200. Accumulation has fallen steadily since hitting a six-month high in December 2020 and is now stuck near a 13-month low, likely to limit gains until pandemic fears recede.

For a look at today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Boeing Upgrades Outlook for Jet Demand on Pandemic Recovery Hopes

The world’s largest aerospace company Boeing has upgraded its long-term forecasts for the commercial, defence and space aerospace market, reflecting signs of the industry’s recovery following the impacts of COVID-19.

According to 2021 Boeing Market Outlook (BMO), the aerospace products and services segment will grow to $9 trillion over the next decade. Forecasts have increased from $8.5 trillion a year ago, and from $8.7 trillion in the pre-pandemic forecast for 2019, reflecting the market’s continued recovery.

According to the Commercial Market Outlook (CMO), the company said the global aerospace market is recovering largely. Within the next two years, long-haul travel is expected to return to pre-pandemic levels, followed by domestic demand for air travel and intra-regional travel, which will ease health and travel restrictions.

The Boeing Market Outlook projects global demand for 19,000 commercial airplanes valued at $3.2 trillion over the next decade. During the next 20 years, Boeing projects the demand for more than 43,500 new airplanes worth $7.2 trillion, up about 500 planes over last year’s forecast.

Boeing Stock Price Forecast

Fifteen analysts who offered stock ratings for Boeing in the last three months forecast the average price in 12 months of $275.87 with a high forecast of $307.00 and a low forecast of $224.00.

The average price target represents a 28.62% change from the last price of $214.48. From those 15 analysts, eight rated “Buy”, seven rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $274 with a high of $373 under a bull scenario and $146 under the worst-case scenario. The firm gave an “Overweight” rating on the company’s stock.

Several other analysts have also updated their stock outlook. UBS cut the target price to $290 from $310. Wells Fargo raised the price target to $254 from $244. Bernstein lifted the target price to $252 from $242. Vertical Research upped the target price to $250 from $242.

Analyst Comments

“We expect the market to value the company based on 2025 normalized post-COVID-19 earnings instead of a partial recovery in 2023. Broader COVID-19 vaccine rollout through 2021, eventual easing of international borders, and improved airline booking trends are positive catalysts that could force bears and sideliners to re-evaluate,” noted Kristine Liwag, Equity Analyst at Morgan Stanley.

“Prior headwinds have abated, including: 1) lower production rates are now aligned to weaker demand; 2) implied aircraft cancellations have been recorded in the backlog de-risking the order book; and 3) current liquidity defers a potential equity raise to at least 2022, removing sentiment overhang.”

Check out FX Empire’s earnings calendar

S&P 500 Ends Down, Big Tech lifts Nasdaq to Record

Amgen Inc fell 2.1% and Merck & Co lost 1.6% after Morgan Stanley cut its rating on the stocks to “equal-weight” from “overweight.”

The Nasdaq was supported by Big Tech stocks that have fueled Wall Street’s gains in recent years. Apple rose 1.6% and Netflix added 2.7%, both hitting record highs.

“You could call it a gravitation toward Big Tech. As people feel a bit uncertain about how COVID will play out, you don’t have your reopening worries with those companies,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.

Much of the rest of Wall Street fell. Eight of the eleven sub-indexes traded lower, with economy-sensitive sectors like industrials down 1.8% and utilities dipping 1.4%. The real estate index lost 1.1%.

Tepid August payrolls data on Friday last week raised concerns that the economic recovery was slowing down.

On Tuesday, Morgan Stanley cut its rating on U.S. stocks to underweight, pointing to risks related to economic growth, policy and legislation, and warning it expects the next two months to be “bumpy.”

Accommodative central bank policies and reopening optimism have pushed the S&P 500 and Nasdaq to record highs over the past few weeks, but concerns are growing about rising coronavirus infections due to the Delta variant and its impact on the economic recovery.

Analysts on average expect S&P 500 companies to increase their earnings per share by 30% in the September quarter, following a 96% surge in the second quarter, according to I/B/E/S data from Refinitiv.

Unofficially, the Dow Jones Industrial Average fell 0.76% to end at 35,100 points, while the S&P 500 lost 0.34% to 4,520.03.

The Nasdaq Composite climbed 0.07% to 15,374.33.

The S&P 500 remains up about 20% year to date, and the Nasdaq is up about 19%.

Boeing Co dropped 1.8% after Ireland’s Ryanair said it had ended talks with the planemaker over a purchase of 737 MAX 10 jets worth tens of billions of dollars due to differences over price.

Match Group Inc jumped over 7% after the S&P Dow Jones Indices said on Friday the Tinder parent will join the benchmark index.

Columbia Property Trust Inc surged 15% after Pacific Investment Management Company said it would buy the company for $2.2 billion.

Volume on U.S. exchanges was 9.2 billion shares, compared with the 9.0 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.27-to-1 ratio; on Nasdaq, a 1.65-to-1 ratio favored decliners.

The S&P 500 posted 19 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 120 new highs and 24 new lows.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Noel Randewich; Additional reporting by Shashank Nayar in Bengaluru; Editing by Anil D’Silva and Arun Koyyur; Editing by Aurora Ellis)

Today’s Market Wrap Up and a Glimpse Into Thursday

Stocks finished the day mixed after the Fed revealed that the economy is on track for employment and inflation. The Dow Jones Industrial Average and S&P 500 were each down fractionally, while the tech-heavy Nasdaq added 100 points to end modestly higher.

As the economy continues on the path to recovery, the Fed tipped its hand, saying it would begin to pull back from its asset purchasing activity. The major indices still remain close to all-time high levels.

One winner in the Dow was Boeing, which surprised Wall Street by swinging to a profit for the first time almost in two years.

Stocks to Watch

The tech earnings parade rolled on, with Facebook taking the spotlight today. Mark Zuckerberg’s company sees 3.51 billion people flock to its platforms,  including Facebook, Instagram, Messenger and Whatsapp, each month, up 12% YoY.

Facebook’s Q2 revenue came in at USD 29.08 billion, continuing a trend that Google, Microsoft and Apple similarly experienced in the quarter. While Facebook’s Q2 results topped Wall Street’s estimates, revenue growth is not expected to be sustained at these levels, the company warned.

PayPal bucked the positive trend in corporate America after its Q2 results disappointed. Worse, the payments company isn’t expecting things to get much better for Q3. Investors punished the stock in extended hours, sending shares lower by about 6%.

Ford shares found a reason to rally thanks to a stronger than expected Q2 in which the company was profitable. The automaker lifted its Q3 forecast on the heels of robust demand for its Ford Bronco SUV.

Shares of cannabis company Tilray climbed more than 25% in the wake of a profitable fiscal Q4. Tilray CEO Irwin Simon sees a world in which marijuana will become legalized at the federal level in the U.S. in the next 18-24 months.

Look Ahead

On Thursday, an advance look at GDP comes out at 8:30 a.m. ET. Wells Fargo economists predict that the economy grew at an annualized pace of 9.1% in the quarter. The economy has come a long way since last year’s pandemic-fueled contraction, which lasted for two months. The economists forecast that consumer spending and business investments were strong in Q2, while supply chain constraints persisted.

Amazon’s earnings come out on Thursday. Bitcoin investors might be listening to the call to hear if the company addresses the recent crypto-related drama.

Why Boeing Stock Is Up By 6% Today?

Boeing Shares Move Higher As Q2 Report Beats Analyst Expectations

Shares of Boeing gained strong upside momentum after the company reported its second-quarter results. Boeing reported revenue of $17 billion and GAAP earnings of $1.00 per share, easily beating analyst estimates on both earnings and revenue. The company’s operating cash flow was -$483 million, which also exceeded analyst expectations.

In its press release, Boeing noted that commercial market environment continued to improve, but the company was closely monitoring COVID-19 case rates.

The company stated that it continued work on the issues with the 737 MAX and 787 programs, which have put some pressure on the stock this year. According to Boeing, the 737 program is producing at a rate of about 16 per month and is expected to reach a production rate of 31 per month in early 2022. The 787 production rate will be temporary lower than five per month and then gradually return to this rate while the company is conducting inspections and rework.

What’s Next For Boeing Stock?

Analysts’ earnings estimates for 2021 have declined in recent months, and analysts expect that Boeing will report a loss of $1.37 per share. However, these estimates will likely be revised after the strong quarterly report.

In 2022, Boeing is expected to report a profit of $5.46 per share, so the stock is trading at 43 forward P/E, which looks rather expensive even in the current market environment.

However, a strong quarterly report shows that Boeing’s business continues to rebound after the blow dealt by the coronavirus pandemic, so traders will stay focused on the company’s future trajectory and will be ready to look beyond 2022.

In this light, Boeing’s rich P/E multiple looks sustainable unless the company encounters additional problems with its airplanes. Earnings estimates for Boeing will likely move higher in the upcoming weeks, which may provide additional support to the company’s shares.

For a look at all of today’s economic events, check out our economic calendar.

Boeing Reports Q1 Profits For The First Time In Two Years

Airplane manufacturer Boeing reported a first-quarter profit for the first time in two years, with the company’s stock price now up by more than 5% today.

Boeing Records Profit In Q1

Plane manufacturer Boeing reported its first-quarter earnings earlier today, and it delivered exceptional results. This is the first time Boeing is recording profits in the first quarter in two years.

The company recorded losses in six consecutive quarters, with the Coronavirus pandemic further affecting its business. Boeing’s revenue went up by 44% to reach $17 billion, after recording $11.8 billion a year earlier. The $17 billion recorded in the first quarter surpassed the analyst estimates of $16.54 billion.

Overall, the adjusted earnings per share were 40 cents compared to a per-share loss of 83 cents. As stated earlier, the revenue was $17 billion vs. $16.54 billion. The increase in Boeing’s revenue came as a result of a surge in deliveries of commercial jetliners. Commercial Airlines are starting to pick up from the pandemic slump, and this has helped Boeing record profits in this quarter.

CEO Dave Calhoun said the company still has a long way before it recovers. However, it is encouraging for Boeing that the commercial market is improving. Boeing had previously revealed that it would slash jobs to about 130,000 employees before the end of the year. However, Calhoun said they would likely retain the current headcount due to the increase in demand.

The revenue in Boeing’s commercial airplane unit surged by roughly 270% from a year earlier. Boeing recorded $6.02 billion in revenue from this sector, but it still reported negative margins of 7.8%.

Boeing’s Shares Rally By Over 5%

The shares of Boeing performed excellently at Wednesday’s pre-market trading session after the company reported its earnings. At the time of this report, BA is trading at $234, up by 5.5% over the past few hours.

BA stock chart. Source: FXEMPIRE

Year-to-date, the company’s stock price has performed well. It began the year trading at $202 per share, and it is now up by over 10%.

Boeing Posts First Profit in Almost Two Years Helped by 737 MAX Deliveries

By Ankit Ajmera and Eric M. Johnson

The 737 MAX is integral to Boeing’s financial recovery, as the U.S. planemaker scrambles to recoup billions of dollars in lost sales from the pandemic, push past the safety scandal caused by two fatal 737 MAX crashes, and deal with structural defects of its bigger, more profitable 787 planes.

Boeing shares were up nearly 6% at $235.18 in early trading following the results, which were also fueled by higher defense and services sales.

Chief Executive Officer David Calhoun said the company now plans to keep staffing levels stable at around 140,000 employees, after previously targeting a reduction to 130,000 by the end of 2021.

“While our commercial market environment is improving, we’re closely monitoring COVID-19 case rates, vaccine distribution and global trade as key indicators for our industry’s stability,” Calhoun said in remarks accompanying results.

While he sounded a note of optimism as U.S. domestic travel returns more quickly than expected, Boeing’s 737 MAX remains grounded in China, where trade tensions between Washington and Beijing have stunted sales, and it faces tougher regulatory scrutiny and weak demand for its delayed 777X mini-jumbo.

Boeing is also working through costly repairs and forensic inspections to fix production-related defects on its 787 program.

It reiterated plans to cut 787 production to an unspecified rate lower than 5 jets per month after finding a new problem, first reported by Reuters, and to deliver fewer than half of the lingering 100 or so 787 Dreamliners in its inventory this year – instead of the “vast majority” it had expected.

Asked whether Boeing has an execution problem on manufacturing given persistent issues on the 787 and other aircraft programs, Calhoun told CNBC: “This is Boeing being tough on Boeing. We started the inspection process, nose to tail.”

Calhoun added that he would start to worry about impacts to production due to a jet order drought from China jet buyers, around the “middle of next year.”

Boeing said it has delivered more than 130 737 MAXs since a safety ban on that jet was lifted in November 2020, and that it was building 16 737 MAX jets per month at its Seattle-area factory. It aims to increase output to 31 per month by early 2022.

“Today could be seen as a tactical victory for Boeing, but the strategic challenges remain,” Vertical Research Partners analyst Rob Stallard said in a client note.

Looking to build momentum, Boeing is preparing to launch its delayed CST-100 Starliner astronaut capsule to the International Space Station on Friday in a crucial do-over test following a near “catastrophic failure” during its 2019 debut.

Calhoun said he is “optimistic, confident” about Friday’s launch after software flaws and NASA reviews sidelined its Starliner for 18 months, and about Boeing’s ability to compete against newer space players such as billionaire entrepreneur Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin.

Boeing’s core operating profit was $755 million in the second quarter, compared with a loss of $3.32 billion a year earlier.

Revenue rose 44% to about $17 billion.

Analysts had on average expected Boeing to report a quarterly loss of $454.8 million on revenue of $16.54 billion, IBES data from Refinitiv showed.

Boeing’s commercial airplanes division, its traditional profit powerhouse, reported a quarterly loss of $472 million, but its defense business earned $958 million and its services division took in $531 million.

(Reporting by Eric M. Johnson in Seattle and Ankit Ajmera in Bengaluru; additional reporting by Tracy Rucinski in Chicago; editing by David Holmes, Jason Neely and Steve Orlofsky)

Boeing Posts First Quarterly Profit Since 2019

Dow component Boeing Co. (BA) is trading at a two-week high in Wednesday’s pre-market after posting the first profit since the third quarter of 2019. The aerospace giant earned $0.40 per-share in Q2 2021, $1.12 higher than estimates, while $44 billion in revenue matched expectations, marking a 44.0% year-over-year increase. The total backlog at the end of the quarter stood at a respectable $363 billion while the company secured new orders for 234 737 airliners and 31 freighter aircraft.

Airline Industry Crosswinds

The 737 MAX is returning to the friendly skies at a rapid pace, with the delivery of more than 130 new aircraft and more than 190 previously grounded aircraft resuming service, translating into nearly 95,000 revenue flights and more than 218,000 flight hours. The company release said little about the potential impact of the Delta variant on the commercial airline industry but that’s likely to be discussed in the 10:30am Eastern conference call.

However, its isn’t all good news for Boeing, with China still withholding certification of the MAX and 787 production delays needed to address FAA mandated inspections and reworking. In addition, business travel is expected to recover at a much slower pace than leisure travel, with the Delta variant forcing many corporations to put off reintegration plans at the same time that international destinations rethink their customs requirements.

Wall Street and Technical Outlook

Wall Street consensus is mixed despite the return of the MAX 737, with an ‘Overweight’ rating based upon 11 ‘Buy’, 2 ‘Overweight’, 11 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $200 to a Street-high $314 while the stock is set to open Wednesday’s session more than $40 below the median $272 target. This placement favors share gains in coming weeks, possibly dampened by continued pandemic headwinds.

Boeing posted an all-time high at 446 in 2019, just before the 737 MAX crashed in Ethiopia. The subsequent decline accelerated in the first quarter of 2020, dropping price to a 7-year low in double-digits, ahead of an uptick that ran into a buzzsaw of resistance above 200. Price action since December has tested the 200-day moving average repeatedly while accumulation has dropped to the lowest low since September 2020, when the stock was trading in the 160s. Given uncertain travel conditions, this sideways action could easily persist into 2022.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Today’s Market Wrap Up and a Glimpse Into Wednesday

A winning streak on Wall Street came to a screeching halt today after all three of the major indices finished in the red. The Dow Jones Industrial Average, S&P 500 and Nasdaq all ended the day lower after Monday’s record session.

The Nasdaq fell more than 1% as tech stocks tumbled. Investors appear to be taking some profits after five days of gains.

Technology leaders reported their earnings after the closing bell, including Google parent Alphabet, Microsoft and Apple. All three companies shined in different areas, while revenues were strong all around.

Durable Goods orders for items such as vehicles and appliances increased last month, the latest data show, in yet another sign that the economic recovery is in full swing. Supply-chain constraints continue to be a problem, however.

The results buoyed General Electric shares, which climbed 1% higher. GE also reported Q2 earnings, and its aviation division is poised to benefit from a rebound in the travel industry.

The FOMC began a two-day meeting today. And while inflation will no doubt be at the center of the discussions, economists are not expecting any surprises. Stock index futures are under pressure, with the Dow Jones, S&P 500 and Nasdaq all moving lower. Dow futures are down nearly 100 points on Tuesday evening.

Stocks to Watch

  • Apple’s earnings were better than expected, while iPhone sales increased 50% vs. year-ago levels to USD 39.6 billion. The stock is down more than 1% in extended-hours trading as investors worry if Apple can keep the good times rolling, especially in light of chip supply issues.
  • Microsoft just flipped green in after-hours trading with the stock up 1%. The company outperformed analyst estimates on the top and bottom lines. Fourth-quarter revenues soared more than 20% to USD 46.2 billion. Microsoft has a market cap of USD 2.15 trillion.
  • Google parent Alphabet far exceeded Wall Street estimates and benefited from robust online advertising sales.

Look Ahead

The earnings parade is far from over, with Facebook, PayPal, McDonald’s and more all on tap for Wednesday. In addition, Dow stock Boeing will unveil its Q2 results before the opening bell. The company is widely expected to report a loss as it continues to grapple with 787 jet airliner setbacks.