S&P 500 Retreats As Treasury Yields Test New Highs

Key Insights

  • Rising Treasury yields put significant pressure on stocks today. 
  • The yield-sensitive REITs declined, while energy stocks moved higher as WTI oil settled back above the $85 level. 
  • Traders should monitor the developments in the European government bond markets as the continuation of the current trends may lead to a debt crisis.

S&P 500 Settled Below 3700

S&P 500 declined below the 3700 level as traders focused on the developments in Treasury markets. Today, Treasury yields gained strong upside momentum and tested new highs. The yield of 2-year Treasuries moved towards 4.55% while the yield of 10-year Treasuries managed to settle above the 4.10% level.

Not surprisingly, rising yields provided material support to the U.S. dollar. Strong dollar and higher Treasury yields served as bearish catalysts for stocks.

There were several notable losers in today’s trading session. Generac , which designs and manufactures power generation equipment, declined by 25% after cutting its full-year guidance. M&T Bank fell 14% after missing analyst estimates on earnings and revenue.

Not surprisingly, REITs were the worst-performing market segment as Treasury yields tested new highs. Leading tech stocks like Microsoft, Alphabet and Amazon were down by about 1% as traders continued to take profits after the recent rebound.

Meanwhile, energy stocks like Baker Hughes, Valero Energy, Halliburton, and Schlumberger were up by 4-5% as WTI oil moved back above the $85 level.

Tesla stock declined towards the $210 level in the post-market session after releasing its third-quarter report. The company reported revenue of $21.45 billion and earnings of $0.95 per share. As usual, traders will stay focused on the upcoming earnings call, which may have a significant impact on the dynamics of Tesla stock.

Meanwhile, IBM gained strong upside momentum and moved towards $129 after releasing its third-quarter results. The company noted that it expected constant currency revenue growth above its mid-single digit model in the full-year 2022. The improvement in the revenue growth forecast provided support to IBM stock in the post-market session.

S&P 500 Remains Volatile

S&P 500

From a big picture point of view, S&P 500 is trying to settle above the 20 EMA, which is located at 3710. Trading has been extremely volatile in recent trading sessions, and some traders may believe that such nervousness is a sign of a bottom.

The recent unsuccessful attempt to settle below previous lows suggests that the market may indeed form a double bottom pattern, targeting the test of the 50 EMA at 3825. However, the developments in U.S. government bond markets show that any potential rally remains in danger.

The action in the European government bond market is not inspiring either, as the yield of Greek 10-year bonds tested the 5.10% level. A potential debt crisis in the Eurozone could hurt U.S. markets.

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

Does the Crypto Crash Affect Web3’s Future?

Key Insights:

  • Over the last two months, the crypto markets have witnessed massive corrections.
  • The global cryptocurrency market cap has shrunk to $930 billion, but traditional markets are taking a beating too.
  • The Web3 and blockchain market is anticipated to register a CAGR of 45.20% despite the recent crash.

American internet entrepreneur Chris Dixon has defined Web 3.0 as ‘the internet owned by users and builders orchestrated with tokens.’ While Dixon’s definition of Web 3.0 doesn’t describe the entirety of the same, it does, however, present a decent picture of what Web 3.0 is truly capable of.

More often than not, mainstream media and newbies put words like blockchain, NFTs, Web 3, DeFi, and many others under a more significant umbrella term – cryptocurrencies.

Over the last two months, crypto markets have witnessed massive corrections. News pieces and blogs have been filled with narratives of ‘crypto is dead.’ Amid the larger bearish undertone, a lot of critics and analysts have argued whether the recent crash would derail the future of Web 3.0 and blockchain.

So, Is Crypto Dead?

Well, while some say ‘crypto is dead,’ others believe that it could just be playing dead. Even though crypto market enthusiasts are desperately waiting for cryptocurrencies like bitcoin, ether, and altcoins to bounce back with their full might, it wouldn’t be wrong to say that a significant recovery could be a little optimistic for now.

The global cryptocurrency market cap has shrunk to $938.66 billion as of July 7, from the $3 trillion high it touched in November 2021. While numbers present a gloomy picture, it’s not just the crypto market that’s bleeding.

2022 has also been a year of losses for major indexes. High inflation, rising interest rates, and growing concerns about corporate profits and economic growth affect investors’ appetite for risk. The technology-heavy Nasdaq Composite Index is down over 25% through roughly the first six months of 2022, while the S&P 500 Index is down by nearly 20%.

The crypto market has been ravaged by weak global cues amid heightened inflation and interest rate hikes. Crypto investors and traders are now wondering whether the market will bounce back again this year.

While tension and panic continue to plague crypto investors, it needs to be kept in mind that macro market conditions haven’t been ideal. In fact, the higher correlation between cryptocurrencies and the traditional finance markets could be viewed as a positive move as this cloud mean that cryptocurrencies as an asset are maturing.

Innovation Stays Intact

While cryptocurrencies being an asset class, are prone to volatility and price change, pretty much like stocks, blockchain technology on which Dapps are made, and crypto functions is an ever-growing technology.

Notably, a May 5 report by Prophecy Market Insights presented that the global Web 3.0 blockchain market accounted for $1231.54 million in 2020 and is estimated to be $87761.35 million by 2030. The sector is anticipated to register a CAGR of 45.20%.

On the other hand, according to another report, the IT services market is expected to register a CAGR of about 10.36 % during the forecast period, 2022-2027.

Thus, numbers indicate a healthy growth graph for blockchain technology and the Web 3 market. Seemingly, innovation continues to take place even though the price trajectory was largely disappointing for the crypto crowds.

Crypto narratives in mainstream media have also been plagued by standalone events like Terra and Celsius’s collapse over the last few months. The marketwide sell-offs, lower open interest, and larger-scale lay-offs in the crypto market added to the space’s bearish pressure.

A Crypto Recovery Incoming

This isn’t the first time the crypto market is seeing a significant pullback; in 2015, 2018, and then 2020, during the pandemic – the global crypto market has seen its ups and downs. Over the many bear markets and long-drawn price pullbacks, the technology behind cryptocurrencies has only evolved.

Taking a look at the previous market cycles highlights that market volatility and macroeconomic conditions have often affected the price of cryptocurrencies pulling the larger market down. While bear markets give rise to lay-offs and selloffs in the market, portraying doom for the space, it’s only the tip of the iceberg.

As the technology and the Web 3.0 narrative grows, a certain market maturation silently takes place on the side. Nonetheless, critics of the space have long argued that using digital currencies for online interaction gives users a financial motivation to take actions previously freed of commercial incentives. The same could financialize online services and lead to interactions becoming a business.

However, crypto geeks and supporters of the space argue that crypto critics fail to reflect the highly diverse nature of online services.

That said, a lot of traditional finance giants like Amazon, Meta, Google, HSBC, and IBM have also embraced crypto and blockchain. A majority of institutions cite consumer demands and the larger adoption of Web 3 as a reason behind turning towards the space.

Nonetheless, the adoption narrative has received a beating due to the larger bear market. In fact, the bearish blues have slowed down the larger crypto adoption, especially since newcomers are cautious about their entry into the space. However, the crypto crash hasn’t derailed the crypto or Web 3 adoption, if at all, it has delayed the pace of growth.

Low Expectations Could Stoke IBM Upside

The new slimmed-down International Business Machines Corp. (IBM) reports its first full quarter since the Kyndryl Holdings Inc. (KD) spin-off after the close, with analysts forecasting a profit of $1.39 per-share on $13.85 billion in revenue. Neither stock has performed well since the Nov. 4 split-up, with KD cut in half while IBM is trading less than two points from the Nov. 3 close. Buying interest has been non-existent during this period, highlighting continued investor apathy.

Safe Haven in Tough Times?

However, IBM could outperform in a slowing economy or deep recession. Hardware budgets will decline but just 20% of the balance sheet is hardware-related after the spin-off while half of all revenues are recurring, through contracts and service agreements. Even the old tech behemoth was considered a good bet in tough times, historically trending in the opposite direction of the Purchasing Managers Index (PMI), a leading indicator for economic strength and weakness.

Morgan Stanley analyst Erik Woodring posted a $150 price target while upgrading the stock to ‘Overweight’ last week, noting the “result is a stronger long-term growth outlook, though investors still question whether mid-single-digit long-term revenue growth is achievable. However, we do see green shoots of improving customer sentiment and spending plans …While it is too early to call a clear inflection, these data points bear watching.”

Wall Street and Technical Outlook

Wall Street consensus stands at an apathetic ‘Hold’ rating based upon 7 ‘Buy’, 9 ‘Overweight’, and 11 ‘Hold’ recommendations. In addition, two analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $115 to a Street-high $185 while the stock is set to open Tuesday’s session about $19 below the median $145 target. Sadly, these dismal ratings have barely budged in the last seven or eight years, perfectly in line with the multiyear downtrend.

IBM topped out in 2013 and entered a severe decline that has carved nine years of lower highs and lower lows. It hit an 11-year low in March 2020 and bounced, reversing at an 8-year down trendline in June 2021. The stock has traded near the midpoint of the 2020 trading range since that time while accumulation continues to slump near 2018 levels. The good news for bulls at this point: no one expects the company to beat earnings and raise guidance, improving odds for a pleasant surprise.

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. 

Best Stocks, Crypto, and ETFs to Watch – Amazon, IBM, Tesla, Bitcoin in Focus

Amazon.com Inc. (AMZN) fell to support at the September 2020 and March 2021 lows at the close of Friday’s session, raising odds for a breakdown from the 18-month topping pattern. It’s typical for stocks to bounce at least once at a major support level but Netflix Inc. (NFLX) defied that expectation when it ripped through 475 on Friday. Of course, almost anything is possible right now, with the S&P Volatility Index closing in on 30.

International Business Machines Corp. (IBM) reports Q4 2021 results after Monday’s closing bell, with analysts looking for a profit of $3.29 per share on $15.96 billion in revenue. November’s Kyndryl Holdings Inc. (KD) spin-off will skew the results, forcing analysts to look for clues about growth prospects for the new slimmed-down operation. IBM failed another attempt to break a 9-year downtrend earlier this month but the new cloud-focused tech giant could defy the odds and enter a new uptrend.

Bitcoin (BTC) fell within 6,000 points of summer support above 28,000 on Saturday, raising fears the crypto king will complete the next leg of a massive double top pattern. The current downdraft has already crossed the .786 Fibonacci retracement level of the June into November rally, predicting it will eventually complete a 100% retracement into the prior low. A breakdown could have a traumatic effect on new traders who have allowed ideology to overcome risk management.

iShares Russell-2000 Index Fund ETF (IWM) broke down from a 12-month topping pattern last week, dropping below 200 for the first time since the start of 2021. The decline is shocking because January marks the most positive seasonality of the year for the small cap universe. This bearish divergence is sending shock waves through other market capitalization tiers, warning participants that broader averages could head into even deeper corrections.

Tesla Inc. (TSLA) reports Q4 2021 earnings after Wednesday’s closing bell, with analysts expecting a profit of $2.36 per share on $16.65 billion in revenue. The stock has been on a seesaw ride since the Q3 report in October, rallying and reversing above 1,200 three times. The broad pattern isn’t encouraging for long-term bulls, with a potential triple top or channeled correction that could reach 800 before attracting sustained buying interest.

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. 

Monstrous Earnings Ahead: IBM, Microsoft, Intel, Tesla, Apple, Visa in Focus, Along With The Fed

Investors will focus on Q4 earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could also hit the stock market hard next week, making the big tech earnings that much more critical. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant in order to see how it impacts earnings in 2022. The following is a list of earnings slated for release January 24-28, along with a few previews.

Earnings Calendar For The Week Of January 24

Monday (January 24)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company, International Business Machines, is expected to report its fourth-quarter earnings of $3.39 per share, which represents year-over-year growth of over 60% from $2.07 per share seen in the same period a year ago.

The world’s largest computer firm’s revenue would decline over 21% to $1.96 billion from $20.37 billion a year earlier. It is worth noting that the technology company has beaten earnings in most of the quarters in the last two years, at least.

International Business Machines (IBM) 4Q earnings will be focused on standalone model mechanics and whether Software revenue can re-accelerate while Consulting demand sustains. However, we believe the setup becomes more attractive in 2H21. We update our estimates to reflect IBM standalone post-KD spin,” noted Katy Huberty, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 24

TICKER COMPANY EPS FORECAST
BRO Brown & Brown $0.38
BOH Bank of Hawaii $1.39
BMRC Bank of Marin Bancorp $0.57
CR Crane $1.12
HAL Halliburton $0.34
HMST HomeStreet $1.3
IBM International Business Machines $3.39
PETS PetMed Express $0.3
SMBK SmartFinancial $0.48
STLD Steel Dynamics $5.66
TRST Trustco Bank $0.74
ZION Zions Bancorp $1.33

 

Tuesday (January 25)

IN THE SPOTLIGHT: MICROSOFT

The Redmond, Washington-based global technology giant, Microsoft, is expected to post its fiscal second-quarter earnings of $2.28 per share, which represents year-over-year growth of over 12% from $2.03 per share seen in the same period a year ago.

The world’s largest software maker would post revenue growth of nearly 17% to around $50.3 billion. It is worth noting that with a track record of always beating earnings per share estimates in the last five years, Microsoft is one of the best FAANG stocks in terms of earnings surprises.

“We model Azure growth of 45% cc & see 2-3% of upside, translating to steady growth vs. 48% last qtr. We see potential for strong M365 demand ahead of price hikes, as well as continued execution from LNKD, PowerApps & Dynamics ERP. Although tougher PC/Server dynamics, we expect strengthening trends for C22. Expect Mar Q guide slightly above Street,” noted Derrick Wood, equity analyst at Cowen.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 25

TICKER COMPANY EPS FORECAST
MMM 3M $2.07
AGYS Agilysys $0.13
AXP American Express $1.75
ADM Archer Daniels Midland $1.19
BXP Boston Properties $1.51
CNI Canadian National Railway $1.25
COF Capital One Financial $5.15
FFIV F5 $1.97
GE General Electric $0.84
JNJ Johnson & Johnson $2.12
LMT Lockheed Martin $8.04
LOGI Logitech International $1.23
NAVI Navient $0.81
NEE NextEra Energy $0.41
VZ Verizon Communications $1.28
WSBC WesBanco $0.67

 

Wednesday (January 26)

IN THE SPOTLIGHT: FOMC MEETING CONCLUDES, INTEL, TESLA

Tuesday and Wednesday will mark the first meeting of the Fed’s policymaking arm in 2022. At around 7:30 pm GMT on Wednesday, Jerome Powell will conduct a press conference. This is expected to be the biggest market event since investors expect more details about the central bank’s plan to raise interest rates.

INTEL: The California-based multinational corporation and technology company is expected to report its fourth-quarter earnings of $0.9 per share, which represents a year-over-year decline of about 40% from $1.52 per share seen in the same period a year ago. The company’s revenue would fall nearly 8% to $18.39 billion.

Intel remains controversial. Long-term skepticism remains and share losses will continue until products ramp on the Intel 4 node (old 7nm), but with a new CFO, improving PC and server market outlooks, cash inflows from the US Govt, Mobileye on the horizon, and a February analyst day now reconfirmed, we are cautiously optimistic sentiment can continue to gradually improve. Still LOTS to prove,” noted Matthew D. Ramsay, equity analyst at Cowen.

TESLA: The California-based electric vehicle and clean energy company is expected to report its fourth-quarter earnings of $2.31 per share, which represents year-over-year growth of 180% from $0.80 per share seen in the same period a year ago.

“Q4 results on 26 Jan are critical to validate (or not) the Q3 profit dynamics that could see Tesla 1) carve out meaningful share from legacy OEMs busy protecting their own share by ramping up BEVs and 2) claim a disproportionate share of the industry profit pool. We raise 2021-23 EBIT and FCF 10%, mostly on higher volume,” noted Philippe Houchois, equity analyst at Jefferies.

The high-performance electric vehicle manufacturer would post revenue growth of over 50% to $16.65 billion. The electric vehicle producer has beaten earnings estimates only twice in the last four quarters.

Tesla 4Q deliveries were 20% above our forecast, annualizing to over 1.2mm units, which is already above our prior FY22 forecast. We raise our forecasts and target to $1,300 on this ‘opening act’ and look for more in FY22,” noted Adam Jonas, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 26

TICKER COMPANY EPS FORECAST
ABT Abbott Laboratories $1.16
ANTM Anthem $5.11
AZPN Aspen Technology $1.41
T AT&T $0.76
KMB Kimberly-Clark $1.29
LRCX Lam Research $8.46
RJF Raymond James Financial $1.77
STX Seagate Technology $2.21
NOW ServiceNow $0.22
SIMO Silicon Motion Technology $1.56
SLG SL Green Realty $1.56
URI United Rentals $6.97
VRTX Vertex Pharmaceuticals $2.92
WHR Whirlpool $5.84

 

Thursday (January 27)

IN THE SPOTLIGHT: APPLE, VISA

APPLE: The consumer electronics giant would post its fiscal first-quarter earnings of $1.88 per share, which represents year-over-year growth of nearly 12% from $1.68 per share seen in the same period a year ago.

The iPhone manufacturer would post revenue growth of 6% to $118.13 billion. It is worth noting that with a track record of always beating earnings per share estimates in the recent five years, Apple is the best FAANG stock in terms of earnings surprises.

Apple is expected to report 1QFY22 earnings after market on Thursday, January 27th and host a call with investors at 5:00 PM ET. In our view, the recent strength in shares is a reflection of investors’ willingness to reward Apple for entering new markets, including electronic vehicles (EV) and the metaverse (with an augmented reality/virtual reality product). Now, we look for comments from management on its future product roadmap to justify the increase in share price,” noted Tom Forte, Senior Research Analyst at D.A. DAVIDSON.

“We are reiterating our BUY rating for Apple (AAPL) and putting our price target of $175 under review ahead of the company reporting 1QFY22 earnings.”

VISA: The world’s largest card payment company is expected to report its fiscal firth-quarter earnings of $1.70 per share, which represents a year-over-year decline of about 20% from $1.42 per share seen in the same period a year ago.

The global technology payment company would post revenue growth of nearly 19% to $6.8 billion. It is worth noting that the company has beaten earnings in most of the quarters in the last two years, at least.

Visa (V) is one of our preferred stocks, as it is a key beneficiary of resilient global consumer spend growth, the ongoing shift from cash to electronic payments, and broadening merchant acceptance. Global Personal Consumption Expenditure and secular growth drivers should support low double-digit revenue growth in the near-to-medium term,” noted James Faucette, equity analyst at Morgan Stanley.

“While Covid-19 headwinds are likely to persist, we see upside opportunity from the faster-than-expected recovery of travel. Continued investment in longer-term initiatives (faster payments, P2P, B2B) and partnerships continue to increase its TAM and offer an opportunity for compounding double-digit earnings growth for the foreseeable future.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JANUARY 27

TICKER COMPANY EPS FORECAST
AOS A.O. Smith $0.77
ALK Alaska Air Group $0.21
BX Blackstone $1.3
CNX CNX Resources $0.5
CMCSA Comcast $0.73
DOW Dow $2.16
EMN Eastman Chemical $1.88
HCA HCA Healthcare $4.57
IP International Paper $1.02
JBLU JetBlue Airways $-0.39
MA Mastercard $2.2
MCD McDonald’s $2.32
LUV Southwest Airlines $-0.39
X U.S. Steel $5.12
V Visa $1.7

 

Friday (January 28)

TICKER COMPANY EPS FORECAST
ALV Autoliv $1.18
BAH Booz Allen Hamilton $0.97
CAT Caterpillar $2.23
CHD Church & Dwight $0.59
CL Colgate-Palmolive $0.79
RDY Dr. Reddy’s Laboratories $0.64
GNTX Gentex $0.33

 

Philippines’ UnionBank Opts Metaco and IBM for Crypto Safekeeping

The Union Bank of the Philippines, a pro-crypto bank, has chosen Metaco and IBM to provide orchestration for cryptocurrency storage solutions. Announced Thursday, Union Bank will deploy crypto management services on IBM Cloud.

“It’s a way to future-proof our banking business,” Cathy Casas, head of the bank’s blockchain, said in an interview with Bloomberg.

The bank will use Metaco’s Harmonize service, a crypto orchestration system. By doing so, UnionBank can improve the insurability of assets with certified physical controls for managing and migrating keys.

“We have the passion for meaningful and sustainable reinvention. We value our strategic partners, like Metaco, and collaborate with them in an alliance that is meaningful in pursuit of a common vision,” UnionBank Senior Executive Vice President Henry Aguda said in the release.

The partnership with UnionBank follows Metaco’s recent opening of Asia Pacific headquarters in Singapore.

Pro-Crypto Moves

The UnionBank debuted its crypto custody services in August 2021, stating that the bank is in “full compliance” with the central bank of the Philippines, in offering this service.

The bank has been exploring crypto-friendly options ever since it installed the first two-way bitcoin ATM, at its main bank branch in early 2019, mainly to address remittance service demand.

The UnionBank has even issued its own stablecoin – PHX – pegged to the Philipino peso and backed by UnionBank reserves. PHX is similar to the US dollar-pegged Tether or USDT.

The stablecoin is available to all UnionBank account holders and can be purchased through debits to account holders.

Crypto Custody Services vs. Wallets

Put simply, custody services are safekeeping solutions for cryptocurrencies. On the other hand, wallets, though hot and cold wallets address safety concerns, are third parties offering storage and safety for digital tokens.

Importantly, crypto custody services are primarily intended for institutional investors and for those who hold large amounts of Bitcoin or Ethereum, or other digital assets. But wallets are for all crypto buyers, sellers, traders, and investors.

Having said that, Metaco services enable institutions to manage not only crypto custody and trading but also smart contract management and decentralized finance (DeFi). Some of Metaco’s crypto custody clients include Swiss banks BBVA and GazpromBank.

“[Clients] can leverage the existing stack, existing run capabilities to manage Metaco vaults directly from existing infrastructure. And we have a number of other similar deals in the pipeline, leveraging our combined capabilities,” Seamus Donoghue, Metaco’s VP of business development said in a CoinDesk interview.

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. 

Is It Time to Buy IBM?

International Business Machines Corp. (IBM) spun off slow-growing legacy operations into Kyndryl Holdings Inc. (KD) earlier this month but the investment community has turned a cold shoulder to the slimmed-down IBM, yielding a fresh series of 52-week lows. However, this services and software business is expected to compete more forcefully with Microsoft Corp. (MSFT) and other cloud players, posting mid-single digit annual revenue growth through 2024.

Slow Transition to Growth

Arvind Krishna took the CEO helm at IBM in 2020, vowing to transition the beaten-down tech behemoth into a growth story. The spin-off was an important first step in this transformation but, so far at least, the schism has won over few long-time bears. However, when taken together with growth projections and a hefty 5.6% dividend, his appointment could finally lift Wall Street ratings, generating a long-term bottom and uptrend that translates into healthy annual returns.

Bank of America hardware analyst Wamsi Mohan discussed Krishna’s potential impact in a weekend interview, comparing his ascent to Microsoft Corp (MSFT) in 2014 when new CEO Satya Nadella heralded years of superior performance. As he notes, “Microsoft is an interesting comparison. I look at Arvind as a leader that could be as transformational as Satya. There is an increased appetite on the Street to understand the trajectory of the business. If the stock starts to move higher, you could get a performance chase.”

Wall Street and Technical Outlook

Wall Street consensus is dismal as noted above, with a ‘Hold’ rating based upon 5 ‘Buy’, 11 ‘Hold’, and 1 ‘Sell’ recommendation. In addition, many small firms have ceased coverage, highlighting chronic apathy. Price targets currently range from a low of $110 to a Street-high $164 while the stock is set to open Monday’s session $7 above the low target. This humble placement should improve in coming months but investors may sit on their hands for now to avoid end-of-year tax selling pressure.

IBM posted an all-time high at 215.90 in 2013 and entered a brutal downtrend that’s carved a long series of lower highs and lower lows. The last rally impulse failed at 146 in June 2021, giving way to a steady downtick that’s relinquished about 30 points into this week’s opening print. The stock has posted intermediate lows at 112, 101, and 86 in the last five years, suggesting that buyers trigger another rally wave between now and the first quarter of 2022.

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. 

Introduction to the Major Fundamental Influences on Forex Prices

When most individuals think of trading, they think of stocks and futures. This is probably because of the long-term history of these investment vehicles. Some may even think of cryptocurrencies because of their huge popularity with a younger generation of investors.

What they may not realize, however, that in terms of market value, there is one asset class that dwarfs them all and, in fact, some may not have even realized that they’ve already speculated in it when they’ve traveled internationally or bought something from a foreign country.

This huge investment class is the foreign exchange market, also known as FOREX. In the FOREX market, an estimated $6 trillion is traded on a daily basis. To put this in perspective, the U.S. stock market trades around $257 billion a day; quite a large sum, but only a fraction of what FOREX trades.

For a novice trader, there is a lot to learn about trading in the foreign exchange market because it lacks the familiarity of stocks like Apple, IBM and Google, as well as the glamor of gold and silver futures.

Before even attempting to trade or invest in the FOREX market, individuals have to become aware of the macro-economic and geo-political factors that help drive the price action in this trading vehicle.

What is FOREX?

Simply stated, the word FOREX is derived by combining parts of foreign currency and exchange. It is also referred to as FX trading.

Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, finance or tourism. FOREX markets tend to be the largest and most liquid asset markets in the world.

Briefly, Forex markets exist as spot (cash) markets as well as derivatives markets, offering forwards, futures, options, and currency swaps.

Market participants use Forex to hedge against international currency and interest rate risk, to speculate on geopolitical events, and to diversify portfolios, among other reasons.

What is a FOREX Pair?

In foreign exchange, currencies trade against each other as exchange rate pairs. For example, EUR/USD is a currency pair for trading the Euro against the U.S. Dollar.

A FOREX pair or currency pair is simply the quotation of the value of a given currency against another. The first is termed the base currency and is the currency being sold, while the second is known as the quote currency and is the currency being bought.

For example, the quotation EUR/USD = 1.0700 would mean 1 Euro is exchanged for $US1.07.

What are the Factors Affecting Forex Pairs?

If you desire to become a successful FOREX trader then you have to develop an understanding of the fundamentals that drive the price action. This is the information that will help you to establish an informed hypothesis about whether a particular FOREX pair is being fairly valued at present and what potential upsides or downsides might be from current price levels.

These include: central bank policy, interest rates, inflation, economic growth, trade data, and political/government factors.

How Does Central Bank Policy Influence FOREX Prices?

The major central banks influence Forex prices by controlling open market operations and interest rate policies. They are responsible for fixing the price of its domestic currency on Forex.

Any action taken by a central bank in the FOREX market is done to stabilize or increase the competitiveness of that country’s economy. A central bank may weaken its own currency by creating additional supply during periods of long deflationary trends, which is then used to purchase foreign currency. This effectively weakens the domestic currency, making exports more competitive in the global market.

Central banks use these strategies to calm inflation. Their doing so also serves as a long-term indicator for FOREX traders.

How Do Interest Rates Influence FOREX Prices?

Interest rates have a significant influence on currency movements. So much so that a currency pair will often spike up or down following a central bank announcement.

The main reason for the volatility is the so-called carry trade, where investors borrow at lower interest rates in one currency and invest at higher interest rates in another.

Basically, investors tend to chase yields so when a central bank raises rates, it tends to make that country’s currency a more attractive investment.

How Does Inflation Influence FOREX Prices?

Central banks raise and lower interest rates to control inflation. Therefore, movement in the inflation rate can impact currency prices. For example, if a country’s central bank believes inflation is rising too quickly, it may raise interest rates to lift the cost of borrowing and to take money out of the system. This action is designed to slow the economy.

For this reason, the national consumer price index (CPI) is one of the most closely watched pieces of information for FOREX traders.

How Does Economic Growth Influence FOREX Prices?

Economic growth is tied directly to the inflation rate, which relates to interest rates. When a country’s economy is growing quickly as measured by the Gross Domestic Product (GDP), for example, the rate of inflation will typically start to rise. This usually means the central bank will need to lift interest rates to slow the rate of growth.

This is why the currency of a country showing strong economic growth will often appreciate against those of other countries showing slow or negative growth.

How Does Trade Data Influence FOREX Prices?

Balance of Trade data, which is based on the relationship between a country’s imports and exports, also has an impact on the direction of a currency’s prices. Trade figures can also be seen by some as a sign of the strength of the economy, which in turn has implications for inflation and interest rates, and therefore the domestic currency.

If a country is exporting more goods than it imports, for example, it increases demand for its currency as the money used to pay for those exports ultimately needs to be converted into the domestic currency.

How Does Political/Government Factors Influence FOREX Prices?

Government policy can have profound implications on FOREX prices especially if it influences the inflation rate.

A government could decide to trim spending and pay down debt, which may end up causing the economy to slow.

Following the pandemic of 2020, many governments flooded their economies with fiscal stimulus. As this money trickled through the economy, it caused inflation which is fueling a response from central banks in the form of interest rate hikes.

In response, Forex markets have experienced heightened volatility as the major central banks race to stem runaway inflation by raising rates. Investors will become more attracted to the currency of the country that raises interest rates more aggressively.

Other Factors to Consider When Trading FOREX

Although fundamental data and daily news events play a major role in the price action of a currency, it is important to note that an estimated 90% of the daily FOREX volume is fueled by speculators (traders). So in addition to knowing the major fundamental influences on the long-term direction of currencies, traders will also need to learn about the technical factors that play a major role in the movement of currency prices.

Are Stock Bulls Back On A Track?

Earnings beats have actually been coming in at a wider margin than average, contrary to lingering fears that supply chain disruptions, material shortages, and climbing costs would lead to disappointing Q3 results.

Q3 Earnings

The big beats now have S&P 500 companies on track to post +30% earnings growth for Q3. Most Wall Street insiders are now expecting Q4 earnings to show right around +20% earnings growth.

Today’s earnings highlights include Albertsons and State Street. Some of the big names reporting later this week include Netflix, Haliburton, Johnson & Johnson, United Airlines, and Procter & Gamble on Tuesday; and Biogen, IBM, Verizon, and Tesla on Wednesday; American Airlines, AT&T, Chipotle, Intel, Snapchat, and Southwest Airlines on Thursday.

The following week is even more highly anticipated as many of the biggest names in the stock market will be reporting.

Economic data

In economic data today, Industrial Production for September is expected to dip due to a combination of Hurricane Ida and supply chain constraints. Supply chain challenges also likely lowered builder sentiment in the October NAHB Housing Market Index due today as well. The supply-side shortages of both materials and labor continue to weigh on economic growth outlooks for the last part of 2021.

However, most bullish analysts have adjusted their 2022 growth projections higher, believing lost growth this year will be made up next year. The labor market is expected to get a boost thanks partially to the dramatic decline in Covid cases, which are down nearly -50% since early-September.

The extreme worker shortage in some sectors has already led to rapid wage growth with hourly earnings in September up +4.6%, led by an increase of nearly +11% in leisure and hospitality. That is what’s considered “sticky” inflation, meaning that it is not likely going to be reversed.

Likewise for consumer goods’ prices that have been creeping higher as manufacturers try to offset higher costs. If wage growth can mostly keep pace with inflation, bulls will likely remain less concerned that rising prices will crush economic growth. In fact, Retail Sales released Friday showed no signs of consumer spending slowing down with sales climbing +15% in September, despite obviously higher costs for many goods. The thought of the economy heating back up quickly is both good and somewhat bad.

There now seems to be more talk on Wall Street about the likelihood of two rates hikes next year rather than just one. There’s actually even some talk of perhaps three rate hikes being possible in 2022, especially if the supply-chain complications continue to create higher prices and fuel higher inflation.

The biggest wildcard right now appears to be the global energy shortage which is already pushing up costs for both consumers and manufacturers and threatens to accelerate headline inflation far beyond wage growth.

Any energy “crisis” will likely only be temporary but it still potentially translates to several quarters of slower growth than many Wall Street bulls have been penciling. If it leads to a massive surge higher in inflation in the months ahead, it also could also pressure the Federal Reserve to pull forward its timeline to begin hiking interest rates.

Technical analysis

ES ##-## (Daily) 2021_10_18 (3_38_51 PM)

SP500 futures are testing daily MA50. With the strong accumulation in this market, I will not be surprised to see a base-building above moving average. If that happens, investors will gain more confidence. Thus, we can see money flowing aggressively into the stock market again. The weakness of the USD gives additional strength for indexes. In that case, bulls will target at least 4600 (important Gann level on a daily chart).

Breaking below 4250 is a game-changer. However, in the absence of bearish macroeconomic factors, we have more chances to see a bullish scenario.

Best Stocks, Crypto, and ETFs to Watch This Week

Netflix Inc. (NFLX) is making headlines these days for Squid Games and a controversial Dave Chappelle special and the stock is flying, breaking out above tough resistance between 550 and 600. However, there’s considerable risk for shareholders when it steps to the earnings plate on Tuesday because subscriber growth has slowed in recent quarters, especially in the US market. Traders could punish the stock after the report if Q3 metrics continue to lag optimistic projections.

International Business Machines Corp. (IBM) has underperformed other tech stocks longer than most Millennials have been trading the financial markets, topping out all the way back in 2013. However, a fourth quarter spin-off of legacy operations is attracting widespread investor interest, lifting the laggard back to an 8-year trendline in the 140s. The old school behemoth’s report on Wednesday could be the catalyst that finally breaks the downtrend, opening the door to much higher prices.

Tesla Inc. (TSLA) has made steady progress since bouncing at the 50-week moving average in May and is now trading just 51 points under January’s all-time high at 900.40. It will have an opportunity to close the distance when it reports earnings after Wednesday’s close but cautious comments about China or supply constraints could prompt investors to have second thoughts. Wall Street analysts aren’t helping the bulls, with a consensus ‘Hold’ rating and median price target more than 70 points below Friday’s close.

Ethereum lifted into resistance at the .786 Fibonacci retracement level of the second quarter selloff last week, setting up a test at the 4,000 level. Bitcoin just sliced through its .786 retracement like butter, lifting above 60,000. However, Ethereum failed a breakout at this harmonic level in September, adding another layer of resistance. In turn, this suggests a two-sided strategy that buys a rally above 4,025 or sells short a decline through 3,800, whichever comes first.

US Natural Gas ETF (UNG) remains in a long-term downtrend, even though its nearly tripled in price since January 2021’s all-time low at 8.22. Three reverse splits since 2011 have sapped the life out of the long-term pattern, reducing the technical power of large percentage price moves. More importantly, the rally has just reached major resistance at the 200-week moving average at 23, significantly raising odds for profitable short sales in the fourth quarter.

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

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

Earnings Week Ahead: Steel Dynamics, NetFlix, Tesla, AutoNation and Honeywell in Focus

Earnings Calendar For The Week Of October 18

Monday (October 18)

IN THE SPOTLIGHT: STEEL DYNAMICS, STATE STREET

STEEL DYNAMICS: The U.S-based domestic steel producer and metal recycler is expected to report its third-quarter earnings of $4.62 per share, which represents year-on-year growth of over 800% from $0.51 per share seen in the same period a year ago.

The third-largest producer of carbon steel products in the United States would post revenue growth of over 114% to around $5.0 billion. The company has consistently beaten consensus earnings estimates for the last four quarters.

The company updated its earnings guidance for the third quarter of 2021 in September. For the period, earnings per share (EPS) were expected to be between $4.880-$4.920.

Steel Dynamics is nearing the end of a multi-year investment cycle centered around the construction of a new, state-of-the-art steelmaking mill which comes online in mid-2021, positioning STLD’s FCF generation to increase from 2021 onwards. The company has a proven track record of shareholder returns, and is poised to deliver greater returns for investors, especially through share buybacks,” noted Carlos De Alba, equity analyst at Morgan Stanley.

STATE STREET: The second oldest continually operating United States bank is expected to post third-quarter earnings of $1.92 per share, which represents year-on-year growth of over 30% from $1.45 per share seen in the same period a year ago. The revenue is expected to increase around 6% to $2.95 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 18

Ticker Company EPS Forecast
STT State Street $1.92
ACI AltaGas Canada $0.45
ELS Equity Lifestyle Properties $0.33
STLD Steel Dynamics $4.62
PACW Pacwest Bancorp $1.03
HXL Hexcel $0.08
SFBS ServisFirst Bancshares $0.96
FNB FNB $0.29
ACKAY Arcelik ADR $0.68
PHG Koninklijke Philips $0.62
ZION Zions Bancorporation $1.36

Tuesday (October 19)

IN THE SPOTLIGHT: NETFLIX, JOHNSON & JOHNSON

NETFLIX: The California-based global internet entertainment service company is expected to report its third-quarter earnings of $2.57 per share, which represents year-over-year growth of over 45% from $1.74 per share seen in the same period a year ago.

The streaming video pioneer would post revenue growth of over 16% to around $7.5 billion. In the last two years, the company has beaten earnings per share (EPS) estimates just thrice with a surprise of nearly 21%.

NetFlix’s better-than-expected third-quarter earnings results could help the stock hit new all-time highs. The company’s shares surged over 17% so far this year and it hit a record high of $646.84 on October 7.

NetFlix (NFLX) stock has emerged from its slump, jumping ~22% in <2 months. Estimates have remained relatively flat and NFLX now trades at 8.5x 2022E Rev, the top of its 3-year range. We expect 3Q net adds of 3.5MM and a 4Q guide of ~7-8MM. Squid Games has demonstrated the impact of a successful international strategy and, if done right, games like Oxenfree could achieve a similar Zeitgest moment. We remain ‘Buy’ rated with a price target of $737, representing 8.5x 2023 JEF Rev,” noted Andrew Uerkwitz, equity analyst at Jefferies.

JOHNSON & JOHNSON: One of the world’s largest and most comprehensive manufacturers of healthcare products is expected to post third-quarter earnings of $2.36 per share, which represents year-on-year growth of over 7% from $2.20 per share seen in the same period a year ago. The revenue to expected to increase over 12% to around $23.6 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 19

Ticker Company EPS Forecast
FMBI First Midwest Bancorp $0.42
DOV Dover $1.85
SBNY Signature Bank $3.70
MAN ManpowerGroup $1.91
JNJ Johnson & Johnson $2.36
PM Philip Morris International $1.56
BK Bank Of New York Mellon $1.01
TRV Travelers Companies $1.91
ERIC Ericsson $0.17
FITB Fifth Third Bancorp $0.91
SYF Synchrony Financial $1.51
KSU Kansas City Southern $2.09
CBSH Commerce Bancshares $0.98
ONB Old National Bancorp $0.36
AMX America Movil Sab De Cv Amx $6.43
AMOV America Movil Sab De Cv $0.31
FULT Fulton Financial $0.33
NFLX Netflix $2.57
ISRG Intuitive Surgical $1.17
CNI Canadian National Railway USA $1.42
OMC Omnicom $1.37
UAL United Airlines Holdings -$1.51
IBKR Interactive Brokers $0.75
WTFC Wintrust Financial $1.52
WDFC Wd 40 $1.24
UCBI United Community Banks $0.66
HAL Halliburton $0.28
SNV Synovus Financial $1.07
PG Procter & Gamble $1.59
IRDM Iridium Communications -$0.02
RNST Renasant $0.66

Wednesday (October 20)

IN THE SPOTLIGHT: TESLA

TESLA: The California-based electric vehicle and clean energy company is expected to report its third-quarter earnings of $1.52 per share, which represents year-over-year growth of 100% from $0.76 per share seen in the same quarter a year ago.

The high-performance electric vehicle manufacturer would report revenue of $13.16 billion. The electric vehicle producer has beaten earnings three times in the last four quarters.

“We expect Tesla will be upbeat in 3Q21 given record deliveries beating estimates by ~20k announced in early October. Furthermore, the company announced record sales of 56,000 in China with a total of 133,248 or 55% of total deliveries for the quarter coming from their Shanghai facility,” noted Jeffrey Osborne, equity analyst at Cowen.

“We look forward to management’s commentary on Tesla’s internal chip production strategy and capacity expansion plans. We also look forward to an update on the opening of the Berlin Gigafactory. Additionally, we look forward to an update on Tesla’s 4680 cells and the incremental deployment of its beta FSD. Finally, we look forward to an update on the timeline for Semi and Cyber truck release.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 20

Ticker Company EPS Forecast
ASML ASML $4.61
ABT Abbott $0.94
NEE NextEra Energy $0.73
BIIB Biogen $4.14
NDAQ Nasdaq Omx $1.71
NTRS Northern $1.67
BKR Baker Hughes Co $0.21
MTB M&T Bank $3.50
MKTX MarketAxess $1.46
LAD Lithia Motors $9.24
FHN First Horizon National $0.35
KNX Knight Transportation $1.06
BOKF BOK Financial $1.78
NEP Nextera Energy Partners $0.61
WSO Watsco $3.49
UNF UniFirst $1.81
SCL Stepan $1.42
TSLA Tesla $1.52
CSX CSX $0.38
CCI Crown Castle International $0.77
DFS Discover Financial Services $3.49
PPG PPG Industries $1.59
EFX Equifax $1.73
GGG Graco $0.64
REXR Rexford Industrial Realty $0.12
OMF OneMain Holdings $2.30
FR First Industrial Realty $0.22
THC Tenet Healthcare $1.03
LSTR Landstar System $2.46
SLM SLM $0.18
VMI Valmont Industries $2.49
SLG SL Green Realty -$0.12
LVS Las Vegas Sands -$0.18
SEIC SEI Investments $0.96
GL Globe Life Inc $1.90
TBK Triumph Bancorp $1.08
RUSHA Rush Enterprises $0.98
RLI RLI $0.59
UMPQ Umpqua $0.44
CNS Cohen & Steers $0.89
FTI FMC Technologies $0.02
TCBI Texas Capital Bancshares $1.10
STL Sterling Bancorp $0.52
ANTM Anthem $6.39
LRCX Lam Research $8.23
IBM IBM $2.53
KMI Kinder Morgan $0.24
URI United Rentals $6.84
CFG Citizens Financial $1.15
CMA Comerica $1.64
EXPO Exponent $0.40
MTG MGIC Investment $0.44
WGO Winnebago Industries $1.96
CVBF CVB Financial $0.37
CP Canadian Pacific Railway USA $0.93
MSM MSC Industrial Direct $1.27
UFPI Universal Forest Products $1.55
FCFS FirstCash $0.81
SNBR Scs Group Plc $1.43

Thursday (October 21)

IN THE SPOTLIGHT: AUTONATION

The Fort Lauderdale-based automotive retailer AutoNation is expected to report its third-quarter earnings of $4.16 per share, which represents year-over-year growth of about 75% from $2.38 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 47%. The automotive retail giant would post revenue of $6.5 billion.

“We are optimistic about the trajectory for new CEO, Mike Manley, previously in various leadership roles at FCA and Stellantis where he demonstrated leadership of highly complex organizations going through transformation changes in scale, scope and technology,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Omni-channel strategy unclear and may result in loss of share. For New Vehicles, historically, market share & gross profit per unit have declined. For Used Vehicles, the standalone used car business model was unsuccessful in the late 1990s. The business mix/growth/margins are similar to the other traditional auto dealers, and the stock trades at a discount to its historical average and vs the dealer average.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 21

Ticker Company EPS Forecast
CROX Crocs $1.84
IQV IQVIA Holdings Inc $2.12
WAL Western Alliance Bancorporation $2.23
PSMT PriceSmart $0.73
SIVB SVB Financial $5.53
OZK Bank Ozk $0.97
CE Celanese $4.73
FFBC First Financial Bancorp $0.52
INTC Intel $1.11
TPH Tri Pointe Homes $0.91
OLN Olin $1.98
WRB W.R. Berkley $0.95
CSL Carlisle Companies $2.75
SNAP Snap -$0.10
MAT Mattel $0.72
VICR Vicor $0.46
CMG Chipotle Mexican Grill $6.30
ASB Associated Banc $0.44
INDB Independent Bank $1.02
GBCI Glacier Bancorp $0.71
SAP SAP $1.68
LUV Southwest Airlines -$0.27
VLO Valero Energy $0.86
WHR Whirlpool $6.11
PBCT People’s United Financial $0.33
AAL American Airlines -$1.09
FCX Freeport-McMoran $0.82
ALK Alaska Air $1.05
GPC Genuine Parts $1.64
AN AutoNation $4.16
SASR Sandy Spring Bancorp $1.09
ABB ABB $0.37
BCS Barclays $0.37
ATLCY Atlas Copco ADR $0.47
DHR Danaher $2.14
FAF First American Financial $1.82
BKU BankUnited $0.87
MMC Marsh & McLennan Companies $1.00
IPG Interpublic Of Companies $0.49
T AT&T $0.78
ALLY Ally Financial $1.95
WBS Webster Financial $1.08
NUE Nucor $6.93
UNP Union Pacific $2.49
EEFT Euronet Worldwide $1.42
TRN Trinity Industries $0.18
SAFE 3 Sixty Risk $0.35
GATX GATX Corp $1.07
KEY KEY $0.56
RCI Rogers Communications USA $0.81
PPBI Pacific Premier Bancorp $0.82
EWBC East West Bancorp $1.51
BX Blackstone $0.89
POOL Pool $3.85
DGX Quest Diagnostics $2.71
ALLE Allegion $1.30
HOMB Home Bancshares $0.44
TSCO Tractor Supply $1.64
SNA Snap-On $3.37
SON Sonoco Products $0.90
WSFS Wsfs Financial $0.88
RHI Robert Half International $1.40

Friday (October 22)

IN THE SPOTLIGHT: HONEYWELL INTERNATIONAL

The company which manufactures parts for planes made by Boeing and Airbus SE, Honeywell, is expected to report its third-quarter earnings of $1.99 per share, which represents year-over-year growth of about 28% from $1.56 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of about 5%. The Charlotte, North Carolina-based company would post revenue growth of about 12% to $8.7 billion.

Last week, the company lifted its guidance for business jet deliveries and said the industry has almost completely shaken off the effects of the COVID-19 pandemic.

The worldwide technology and manufacturing company in its 30th annual Global Business Aviation Outlook forecasts up to 7,400 new business jet deliveries worth $238 billion from 2022 to 2031, up 1% in deliveries from the same 10-year forecast a year ago.

“We think that Honeywell (HON) stock currently is a better pick compared to Rockwell Automation stock, despite Rockwell’s revenue growing at a faster pace over the recent years. Honeywell trades at about 4.4xtrailing revenues, compared to 5.1x for Rockwell. Although both the companies saw a decline in revenue due to the pandemic, Rockwell has seen a sharp recovery aided by new orders and impact of ASEM, Kalypso, and Fiix acquisitions,” noted equity analysts at TREFIS.

Honeywell, on the other hand, is still seeing slower revenue growth, primarily due to its exposure to the aerospace segment, which was one of the worst-hit businesses during the pandemic. However, there is more to the comparison. Let’s step back to look at the fuller picture of the relative valuation of the two companies by looking at historical revenue growth as well as operating margin growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE OCTOBER 22

Ticker Company EPS Forecast
VFC VF $1.16
GNTX Gentex $0.40
SAM Boston Beer $4.26
IHG Intercontinental Hotels $0.20
ALV Autoliv $0.82
AXP American Express $1.76
SLB Schlumberger $0.35
ROP Roper Industries $3.83
HCA HCA $3.96
CLF Cliffs Natural Resources $2.21
HON Honeywell International $1.99
RF Regions Financial $0.53
STX Seagate Technology $2.21
AIMC Altra Industrial Motion $0.82

 

IBM Rallies to 8-Year Trendline Resistance

International Business Machines Corp. (IBM) has rallied to 8-year trendline resistance for the second time this year, setting up the fifth breakout attempt since the tech behemoth topped out in 2013. A short-lived June breakout trapped new shareholders in an ugly reversal that dropped the stock to a 5-month low less than 3-weeks ago. A successful advance should attract widespread attention, marking the end of IBM’s historic fall from grace.

Details on Upcoming Spin-off

The company is scheduled to spin off legacy divisions from a new faster-growing entity prior to year’s end. ‘Software’ leads the new segment list, underpinned by Red Hat and the “adoption of its OpenShift hybrid platform” while ‘Consulting’ will focus on digital strategy and design as well as 3rd party relationships. In addition, the ‘Infrastructure’ segment is expected to post flat revenue, comprised of IBM Systems (IBM Z, POWER, Storage), along with IaaS + Infrastructure.

Credit Suisse analyst Matthew Cabral raised his firm’s price target to $176 from $167 after management’s upbeat presentation, noting that “IBM hosted an investor briefing outlining its hybrid cloud strategy, business plan and target financial model post the expected C4Q spin-off of its MIS business. Management unveiled a simplified post-spin reporting structure & detailed midterm (2022-’24) expectations for its three primary segments”.

Wall Street and Technical Outlook

Wall Street consensus has been bearish for years, stuck at a ‘Hold’ rating now based upon 5 ‘Buy’, 11 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. In addition, a number of firms have dropped coverage. Price targets currently range from a low of $115 to a Street-high $176 while the stock is set to open Wednesday’s session about $8 below the median $150 target. This low placement is unlikely to help or hurt the breakout attempt due to chronic negative sentiment.

IBM fell to an 11-year low during March 2020’s pandemic decline and bounced in a two-wave advance that reached multiyear trendline resistance in April 2021. The June breakout failed, giving way to persistent downside that found support after undercutting the 200-day moving average in September. The stock has ticked higher in a steady advance since that time but technical improvement has been constrained, suggesting that price development needs more time and lots more bulls to generate sustained upside.

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. 

The Role of Blockchain in Finance

Blockchain offers tremendous benefits for businesses. The question is whether they will use them to their advantage.

The rapidly progressing adoption of blockchain technology and cryptocurrencies are disrupting the financial industry.

According to CoinMarketCap, the crypto market – which now includes over 9,800 digital assets – has a combined capitalization of $1.25 trillion, outpacing Apple on the road to challenge gold’s leading position ($11.65 trillion).

At the same time, a recent report estimates the blockchain market to expand from 2019’s $2.01 billion to $69.04 billion by 2027 at a compound average growth rate (CAGR) of 56.1%.

By now, it has become clear that distributed ledger technology (DLT) is in high demand.

But how can blockchain and crypto help financial organizations in improving business efficiency?

Blockchain Is More Than Crypto

When most people hear the phrase “blockchain”, the first thing that comes to their minds is cryptocurrency.

Indeed so, blockchain is the underlying technology of crypto, which powers nearly all digital assets on the market while promoting transparency, high security, peer-to-peer (P2P) transactions, and decentralization.

That said, blockchain is not solely about cryptocurrency transactions. Instead, DLT can be used in almost any field related to data delivery and information processing.

For that reason, many companies are either considering or already adopted blockchain technology to enhance their business processes.

Despite that DLT is still in its very early form, there are many examples of large corporations utilizing the blockchain for real-world use-cases.

One is Walmart that has partnered with IBM and Unilever to leverage the Hyperledger Fabric blockchain for tracking product supply chains.

IBM also has its own blockchain, with the multinational tech firm becoming a leading B2B distributed ledger technology provider in recent years.

Real-world blockchain applications continue to proliferate, with an increasing number of companies integrating DLT-based solutions into their business processes to achieve higher efficiency.

Through transparency in a decentralized environment, businesses can promote trust as well as attract new customers and increase their existing clients’ loyalty, who can now track their products to assess their quality via the blockchain.

In China, the clothing-retail giant H&M partnered with the VeChain blockchain platform to implement a similar solution.

By leveraging DLT, the company’s customers can access detailed information about the production of branded clothing by simply scanning a QR code via their smartphones. Furthermore, shoppers can even watch videos of how the products in the stores were made in the factories.

The Power of Blockchain

As you can see, blockchain is a powerful tool for businesses.

And for an excellent reason, DLT offers both service providers and end-users tremendous benefits compared to traditional systems.

Due to its transparent nature, blockchain technology allows data to be tracked from start to finish, eliminating the need for blind trust from customers. At the same time, it offers an opportunity for businesses to attract more users.

Furthermore, blockchain transactions are peer-to-peer, which means there’s no need for intermediaries or other third parties. As a result, companies can significantly reduce their operational costs while improving business efficiency by accelerating and automatizing processes via smart contracts.

Despite the traceability and visibility of blockchain transactions, users do not know the real persons behind the transfers, which makes them more private than traditional solutions.

How Businesses Adopt Crypto

Blockchain and cryptocurrency often walk hand in hand.

For that reason, many businesses are increasingly exploring crypto as an asset class for investments.

Since 2020, we have seen that this has become a growing trend among not just private and digital asset businesses but also publicly traded companies.

For example, MicroStrategy, Tesla, and Square have invested $2.24 billion, $1.5 billion, and $220 million in BTC to date, respectively.

But what would happen if businesses decided to adopt cryptocurrencies for payments as well?

The thing is, many of them already did.

In addition to the travel industry where digital assets have demonstrated increased adoption for payments (e.g., Expedia, airBaltic, LOT Polish Airlines), large enterprises like Microsoft, Starbucks, AXA Insurance, etc. have integrated crypto as a payment method for their solutions.

Furthermore, while PayPal has already added support for crypto transactions, Visa and MasterCard are racing against each other to integrate digital asset settlement into their massive payment networks.

Cryptocurrency Promotes Financial Sovereignty

Compared to fiat currency, crypto has three major advantages: autonomy, convertibility, and decentralization.

Blockchain networks are highly resilient against network issues and do not require third-party intervention to operate.

For that reason, cryptocurrencies are virtually independent of government action, with the latter potentially causing severe failures in the monetary system that can often lead to economic collapses.

Furthermore, with the industry maturing, it has become much easier to exchange fiat currency to crypto with only a small commission.

Thereby, crypto can be effectively used for cross-border transactions, which usually feature much faster settlements and cost-efficient fees compared to traditional international transfer (especially for payment-optimized assets like XRP or XLM).

Businesses Must Adopt Blockchain to Become More Efficient

Blockchain is a technology that is still being studied.

Yet, despite its early development stage, DLT already has a lot to offer for the companies willing to adopt it.

Besides, as more of blockchain’s potential gets harnessed, we will undoubtedly see drastic changes in the financial industry and many other sectors as key players seek to achieve greater operational efficiency.

Petr Kozyakov, co-founder and CEO at the global payment network Mercuryo

IBM Unlikely to Break Multiyear Resistance

International Business Machines Corp. (IBM) is trading higher by 3% in Tuesday’s pre-market after posting the strongest quarterly growth in three years. The old school tech behemoth reported a Q2 2021 profit of $2.33 per-share, $0.04 higher than estimates, while revenue rose a modest 3.4% year-over-year to $18.75 billion, $400 million higher than consensus. The company issued inline fiscal year guidance, expecting adjusted free cash flow of $11 – $12 billion based in July exchange rates.

What’s Happening with Spin-Off?

Cloud and Cognitive Software division income rose 6% year-over-year while Global Business services added 12%. IBM reported $27 billion in total cloud revenue in the last 12 months, marking a 15% year-to-year improvement. It posted less spectacular results in the most recent quarter, with $7 billion yielding a 13% gain. Red Hat revenue grew a respectable 20% in the sixth full quarter since the company was acquired in a $34 billion transaction.

Curiously, the release provided no update on the spin-off announced in October 2020. IBM is scheduled to segregate the slow-growing Managed Infrastructure Services division into an entity called ‘Kyndryl’ by year’s end, in order to focus on faster-growing cloud and software operations. While the new slimmed-down business should command a higher multiple, the lack of updates may indicate internal issues that could impact the rollout.

Wall Street and Technical Outlook

Wall Street consensus is mixed despite a morning upgrade from Societe Generale, with a ‘Hold’ rating based upon 5 ‘Buy’, 11 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $115 to a Street-high $185 while the stock is set to open Tuesday’s session about $7 below the median $150 target. This humble placement suggests high levels of Main Street skepticism after years of sub-par performance

IBM topped out at 215.80 in 2013 and entered a brutal decline that posted an 11-year low in March 2020.  The subsequent uptick reached an 8-year trendline of declining highs in June 2021, yielding a quick rally, followed by a failed breakout that reinforces the secular downtrend. A buying spike above 153 is now needed to mount this substantial barrier but that seems unlikely because the stock has been under active distribution for the last 18 months.

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 Tuesday

Today was not a pretty day in the markets after investors fled equities on rising fears of the COVID-19 Delta variant and the damage it could do to the economy. The Dow Jones Industrial Average shed 721 points, or more than 2%, for losses it hasn’t experienced since last October despite being off its lows of the session. Boeing was one of the hardest-hit stocks on worries of another lockdown, falling almost 5%.

The S&P 500 tumbled close to 2% while the Nasdaq was down just over 1%. Stocks weren’t the only asset class that suffered. Brent crude was down close to 7% to below the USD 70 threshold. Oil was set up for declines after OPEC and its allies reached an agreement over the weekend to bolster supply in an attempt to ease prices.

There was almost nowhere for investors to hide, except for bonds. Gold and bitcoin were even down on the day. Meanwhile, the yield on the 10-year Treasury fell to multi-year lows at 1.17%.

Stocks to Watch

IBM is in focus after the closing bell. After getting caught up in the selling pressure during the regular session, the stock rebounded in extended-hours trading. IBM is up nearly 4% thanks to a better-than-expected quarterly report in which the company’s top and bottom lines surpassed Wall Street estimates. The company proved that the turnaround from the pandemic was not a fluke as services and software both outperformed.

Investors are also celebrating AMC Entertainment in the after-hours for some fundamental reasons. The company announced the reopening of two theatres in the Los Angeles district. AMC was able to successfully negotiate with real estate firm Caruso to open the doors on the theatres after they were temporarily shut due to the pandemic. AMC shares are up fractionally in the extended-hours session.

Apple shares dropped close to 4%. The stock was recently perched at a fresh all-time high of USD 150 and is now trading closer to USD 140. Incidentally, Montreal-based investment firm Hexavest slashed its positions in tech stocks Apple and Microsoft in favor of healthcare stocks Merck and Pfizer in early 2021.

Look Ahead

On the economic front, Housing Starts for the month of June will be released on Tuesday. Wells Fargo economists are expecting a slight increase vs. May levels amid uninterrupted demand and improved conditions for lumber.

Netflix reports its Q2 results on Tuesday. The stock managed to eke out gains on Monday amid bullish expectations on Wall Street. Halliburton reports its Q2 earnings results on Tuesday.

Earnings vs Inflation – What Is The Right Bet?

As investment money will always be looking for a place to roost many stocks still look like the best opportunity for alpha, especially some of your bigger high-tech companies like Microsoft, Google, Facebook, etc… who don’t face the same headwinds created by supply chain dislocations, higher commodity prices, etc.

Fundamental analysis

Bulls are hoping to see more money lured into the market by strong Q2 earnings which have so far failed to ignite a meaningful rally. Analyst expectations for S&P 500 company earnings is still around +65%, something stock bears argue is lofty considering the extreme level of supply chain dislocations and labor shortages.

There is also a lot of debate about whether corporate profit gains are “peaking” in the face of slower growth in the quarters ahead as the reopening boom begins to fade. Remember, investors place bets on the future, not what happened last quarter.

The earnings pace really picks up next week with highlights including IBM on Monday; Chipotle and Netflix on Tuesday; ASML, CocaCola, Novartis, and Verizon on Wednesday; Abbott Labs, AT&T, Biogen, Capital One, Dow Inc., Intel, Snap, Southwest Airlines, Twitter, and Union Pacific on Thursday; and American Express, Honeywell, and Nextera on Friday.

Inflation

One of the biggest factors that seem to be weighing on investor sentiment continues to be inflation. The latest indication of rising costs was reflected last week in U.S. Import Prices, which climbed for an eighth straight month in June.

However, the year-on-year increase slid to +11.2%, down from +11.6% in May is an encouraging sign that some inflationary pressures might be starting to ease. Federal Reserve Chairman Jerome Powell, testifying before the Senate Banking Committee yesterday, repeated the script he’s stuck with for months, saying inflation will likely remain elevated in the coming weeks and months before moderating.

Powell also told lawmakers that the Fed is not in a hurry to start paring its monthly asset purchases but he stressed that the central bank is prepared to adjust policy if they see signs of inflation moving “materially and persistently beyond levels consistent with our goal.” Wall Street increasingly expects the Fed to start trimming asset purchases later this year and even start lifting rates as soon as Q4 2022.

The Fed meets next on July 27-28 but most analysts think Powell will wait to make any big policy change announcements at either the annual Jackson Hole symposium at the end of August or possibly the FOMC’s September policy meeting. Central banks in Canada and New Zealand this week scaled back their asset purchase schemes which some worry could start to put pressure on central bankers in other developed countries to also tighten.

The European Central Bank releases its latest policy decision next Thursday. Bulls still largely believe that U.S. growth will be able to outpace “transitory” inflation pressures but the outlook for some companies could dim if the Fed starts reining in its “easy money” policies sooner than investors have been anticipating.

sp500 analysis forecast 18 july 2020

SP500 technical analysis

SP500 pulled back last week after another attempt to break out. There is no surprise we see such choppiness in the middle of summer. Moreover, very likely this price activity will stay for a few more weeks. We are still in a bull market. However, the risk of deep pullback is rising. If that happens, SP500 will target to close the gap near 4000.

On the other hand, if the price sustains above Gann resistance 4400, bulls will target 4500 at least. Two of my favourite indicators are giving opposite signals now. So, I don’t have any strong bias at the moment. Advance Decline Line remains bearish. At the same time, Insider Accumulation is bullish. In general, swing traders have to focus on daily support and resistance. Likely it will take few more weeks to see a real direction. Short-term traders can use Gann levels and Cycles on 4h charts to find trading opportunities.

Earnings to Watch Next Week: IBM, Netflix, Coca-Cola, Twitter, Intel and American Express in Focus

Earnings Calendar For The Week Of July 19

Monday (July 19)

IN THE SPOTLIGHT: IBM

The Armonk, New York-based technology company is expected to report its second-quarter earnings of $2.32 per share, which represents year-over-year growth of over 6% from $2.18 per share seen in the same quarter a year ago.

The world’s largest computer firm would post revenue growth of about 1% to $18.24 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

The better-than-expected results, which will be announced on Monday, July 19, would help the stock recover its last year’s losses. IBM shares rose about 12% so far this year.

“We expect IBM to marginally beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in three of the last four quarters,” noted analysts at Trefis.

“In the past year the company has increased its investment in R&D and capex and since October has acquired seven companies focused on hybrid cloud and AI. As the pace of vaccination increases and countries are opening up, we expect the momentum to continue in the second-quarter FY2021 results as well. Our forecast indicates that IBM’s valuation is around $140 per share, which is in line with the current market price of $140.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 19

Ticker Company EPS Forecast
TSCO Tractor Supply $2.97
PPG PPG Industries $2.20
JBHT J B Hunt Transport Services $1.57
CCK Crown $1.78
STLD Steel Dynamics $3.38
PACW Pacwest Bancorp $0.99
WTFC Wintrust Financial $1.59
FNB FNB $0.28
SFBS ServisFirst Bancshares $0.93
IBM IBM $2.32
PLD ProLogis $0.45
ACI AltaGas Canada $0.68
ZION Zions Bancorporation $1.29
NVR NVR $72.35
ELS Equity Lifestyle Properties $0.28
AN AutoNation $2.67

Tuesday (July 20)

IN THE SPOTLIGHT: NETFLIX, UNITED AIRLINES HOLDINGS

NETFLIX: The California-based global internet entertainment service company is expected to report its second-quarter earnings of $3.18 per share, which represents year-over-year growth of 100% from $1.59 per share seen in the same quarter a year ago.

The streaming video pioneer would post revenue growth of about 19% to around $7.3 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

“Areopening consumer and the lingering effects of 2020’s production delays suggest risk to consensus 2Q/3Q estimates. However, more content is on the way, supporting an increase in net additions in 4Q21/’22. In this cross-asset report, we reiterate OW on shares and reiterate our recommendation to buy 10Y bonds in credit,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“We believe share performance is highly dependent on increasing global membership scale. Proven success in the US and initial international markets provides a roadmap to success in emerging markets, and scale should allow NFLX to leverage content investments and drive margins. Higher global broadband penetration should increase the NFLX addressable market, driving member growth and providing further opportunity given NFLX’s global presence. Longer-term, we see the ability to drive ARPU growth, particularly given increased original programming traction.”

UNITED AIRLINES HOLDINGS: One of the largest airlines in the world is expected to report a loss for the sixth consecutive time of $4.21 in the second quarter of 2021 on July 20 as the aviation service provider continues to be negatively impacted by the ongoing COVID-19 pandemic and renewed travel restrictions.

However, that would represent a year-over-year improvement of about 55% from -$9.31 per share seen in the same quarter a year ago.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 20

Ticker Company EPS Forecast
DOV Dover $1.82
OMC Omnicom $1.38
SBNY Signature Bank $3.14
PM Philip Morris International $1.54
HCA HCA $3.16
SYF Synchrony Financial $1.38
KEY KEY $0.54
ALLY Ally Financial $1.50
MAN ManpowerGroup $1.41
GATX GATX Corp $1.03
BMI Badger Meter $0.46
ONB Old National Bancorp $0.40
FMBI First Midwest Bancorp $0.38
NFLX Netflix $3.18
CNI Canadian National Railway USA $1.49
CMG Chipotle Mexican Grill $6.50
IBKR Interactive Brokers $1.03
UAL United Airlines Holdings -$4.21
PNFP Pinnacle Financial Partners $1.44
RXN Rexnord $0.50
UCBI United Community Banks $0.62
SNBR Scs Group Plc $1.07
FULT Fulton Financial $0.33
RUSHA Rush Enterprises $0.79
ISRG Intuitive Surgical $3.07
UBS UBS Group $0.42
TRV Travelers Companies $2.38
HAL Halliburton $0.22
CFG Citizens Financial $1.10
SNV Synovus Financial $1.03
IRDM Iridium Communications -$0.06
NEOG Neogen $0.14
EXPO Exponent $0.42
RNST Renasant $0.77

Wednesday (July 21)

IN THE SPOTLIGHT: COCA-COLA

The world’s largest soft drink manufacturer is expected to report its second-quarter earnings of $0.56 per share, which represents year-over-year growth of over 30% from $0.42 per share seen in the same quarter a year ago. The company’s revenue would grow over 30% to $9.4 billion.

“We are Overweight Coca-Cola (KO) after significant stock underperformance given COVID impacts on KO’s on-premise eating / drinking out business (~40% of sales) and gas & convenience (~10%) with gov’t mandated restaurant closures and reduced foot traffic. COVID impacts drove a large -9% organic sales decline in 2020, but we forecast a recovery to ~8% organic growth in 2021/2022 with a post-COVID recovery in away-from-home,” noted Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe Coke’s LT topline growth outlook is above peers, with strong pricing power, and favorable strategy tweaks under Coke’s CEO, including increased innovation and a cultural shift towards a total beverage company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 21

Ticker Company EPS Forecast
JNJ Johnson & Johnson $2.29
ASML ASML $2.98
KO Coca-Cola $0.56
ANTM Anthem $6.34
NDAQ Nasdaq Omx $1.72
RCI Rogers Communications USA $0.62
NTRS Northern $1.71
BKR Baker Hughes Co $0.16
MTB M&T Bank $3.65
MKTX MarketAxess $1.72
LAD Lithia Motors $6.01
HOG Harley Davidson $1.21
BOKF BOK Financial $1.83
STX Seagate Technology $1.84
KNX Knight Transportation $0.88
CCI Crown Castle International $0.68
CSX CSX $0.37
DFS Discover Financial Services $4.01
EFX Equifax $1.71
GL Globe Life Inc $1.83
LVS Las Vegas Sands -$0.15
SEIC SEI Investments $0.91
WHR Whirlpool $5.95
GGG Graco $0.61
REXR Rexford Industrial Realty $0.09
OMF OneMain Holdings $2.12
THC Tenet Healthcare $1.07
FR First Industrial Realty $0.22
SLM SLM $0.37
LSTR Landstar System $2.33
SLG SL Green Realty $0.17
VMI Valmont Industries $2.50
RLI RLI $0.75
UFPI Universal Forest Products $1.56
STL Sterling Bancorp $0.50
UMPQ Umpqua $0.45
FTI FMC Technologies -$0.01
CNS Cohen & Steers $0.82
MC Moelis & Company $0.83
TCBI Texas Capital Bancshares $1.24
BXS BancorpSouth $0.67
PLXS Plexus $0.91
NVS Novartis $1.54
SAP SAP $1.44
TXN Texas Instruments $1.83
EBAY eBay $0.95
KMI Kinder Morgan $0.19
URI United Rentals $4.90
IPG Interpublic Of Companies $0.43
FNF Fidelity National Financial $1.41
CMA Comerica $1.60
MTG MGIC Investment $0.42
FCFS FirstCash $0.60
CVBF CVB Financial $0.35
PTC PTC $0.63
PPERY PT Bank Mandiri Persero TBK $0.18

Thursday (July 22)

IN THE SPOTLIGHT: TWITTER, INTEL

TWITTER: The online social media company that enables users to send and read short 140-character messages called “tweets”, is expected to report its second-quarter earnings of $0.07 per share, which represents year-over-year growth of over 105% from a loss of -$0.16 per share seen in the same quarter a year ago.

The San Francisco, California-based company would post revenue growth of about 55% to $1.06 billion.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for TWTR given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

INTEL: The California-based multinational corporation and technology company is expected to report its second-quarter earnings of $1.07 per share, which represents a year-over-year decline of about 14% from $1.23 per share seen in the same quarter a year ago. The company’s revenue would fall over 10% to $17.73 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JULY 22

Ticker Company EPS Forecast
ULVR Unilever £1.29
PSON Pearson £8.40
ABB ABB $0.36
CBSH Commerce Bancshares $1.02
DOW Dow Chemical $2.36
DHR Danaher $2.05
FITB Fifth Third Bancorp $0.81
FAF First American Financial $1.70
RS Reliance Steel & Aluminum $4.73
T AT&T $0.79
WBS Webster Financial $0.99
UNP Union Pacific $2.54
BKU BankUnited $0.86
SNA Snap-On $3.21
ABT Abbott $1.02
NEM Newmont Mining $0.81
MMC Marsh & McLennan Companies $1.42
BIIB Biogen $4.60
TRN Trinity Industries $0.09
DGX Quest Diagnostics $2.86
ALLE Allegion $1.30
CLF Cliffs Natural Resources $1.52
TPH Tri Pointe Homes $0.81
VLY Valley National Bancorp $0.29
EWBC East West Bancorp $1.39
DHI DR Horton $2.82
SON Sonoco Products $0.86
POOL Pool $5.49
WSO Watsco $3.01
SAFE 3 Sixty Risk $0.33
CSL Carlisle Companies $2.22
WRB W.R. Berkley $0.98
SAM Boston Beer $6.69
SIVB SVB Financial $6.42
CE Celanese $4.34
RNR Renaissancere $4.62
TWTR Twitter $0.07
INTC Intel $1.07
WSFS Wsfs Financial $0.90
GBCI Glacier Bancorp $0.72
ABCB Ameris Bancorp $1.20
OZK Bank Ozk $0.92
ASB Associated Banc $0.47
FFBC First Financial Bancorp $0.52
VICR Vicor $0.33
VRSN Verisign $1.36
COF Capital One Financial $4.57
INDB Independent Bank $1.08
ASR Grupo Aeroportuario Del Sureste $36.49
SKX Skechers USA $0.51
RHI Robert Half International $1.05
FE FirstEnergy $0.57
SNAP Snap -$0.18
AEP American Electric Power $1.12
LUV Southwest Airlines -$0.27
AAL American Airlines -$2.12
DPZ Dominos Pizza $2.86
ALK Alaska Air -$0.62
NUE Nucor $4.76
BX Blackstone $0.78
FCX Freeport-McMoran $0.75
SASR Sandy Spring Bancorp $1.20
GPC Genuine Parts $1.52
ORI Old Republic International $0.53
HTH Hilltop $1.03
CROX Crocs $1.54
BCO Brinks $0.98
FFIN First Financial Bankshares $0.38
CNA Centrica £1.80

Friday (July 23)

Ticker Company EPS Forecast
HON Honeywell International $1.94
SLB Schlumberger $0.26
AXP American Express $1.63
KMB Kimberly Clark $1.74
NEP Nextera Energy Partners $0.61
ROP Roper Industries $3.67
RF Regions Financial $0.53
NEE NextEra Energy $0.69
AIMC Altra Industrial Motion $0.81
GNTX Gentex $0.44
FBP First Bancorp FBP $0.22
VTR Ventas -$0.08
GT Goodyear Tire & Rubber $0.16
ACKAY Arcelik ADR $0.48
MGLN Magellan Health $0.60
SXT Sensient Technologies $0.78

 

IBM Q2 Earnings to Rise 6%; Target Price $151

The Armonk, New York-based technology company, IBM, is expected to report its second-quarter earnings of $2.32 per share, which represents year-over-year growth of over 6% from $2.18 per share seen in the same quarter a year ago.

The world’s largest computer firm would post revenue growth of about 1% to $18.24 billion. In the last four consecutive quarters, on average, the company has delivered earnings of over 5%.

The better-than-expected results, which will be announced on Monday, July 19, would help the stock recover its last year’s losses. IBM shares rose about 12% so far this year.

Analyst Comments

“We expect IBM to report in-line 2Q results with upside risk from FX. While largely negative CIO survey data and recent headlines leave us more cautious ST, our LT outlook is unchanged. We view CEO Arvind’s sustainable growth strategy positively and believe the stock set-up improves in 2022,” noted Katy L. Huberty, equity analyst at Morgan Stanley.

“We expect Cloud & Cognitive Software and GBS to continue improving through 2021 as IT spend returns, but still believe 2021 is a challenging year for IBM given the upcoming Infrastructure Services spin. Near-term, we expect IBM to be pressured by greater recurring revenue mix vs. peers as IT spending recovers, tough 1H21 mainframe compares, and the fact that spin transactions historically don’t outperform until post-close. Results from our AlphaWise CIO surveys also point to lower spending intentions with IBM despite the Red Hat deal. While we view IBM’s go-to-market changes, M&A, and partnership investments positively, we require further evidence of improvement before getting constructive.”

IBM Stock Price Forecast

Eight analysts who offered stock ratings for IBM in the last three months forecast the average price in 12 months of $151.75 with a high forecast of $175.00 and a low forecast of $121.00.

The average price target represents an 8.05% change from the last price of $140.45. From those eight analysts, four rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $152 with a high of $205 under a bull scenario and $78 under the worst-case scenario. The firm gave an “Equal-weight” rating on the technology company’s stock.

Several other analysts have also updated their stock outlook. Credit Suisse Group lifted their price objective to $165 from $160 and gave the company an “outperform” rating. Stifel Nicolaus lifted their price objective to $151 from $147 and gave the company a “buy” rating. BMO Capital Markets lifted their price target to $150 from $138 and gave the company a “market perform” rating.

“We expect IBM to marginally beat the consensus estimates for revenues and earnings. The company has reported better than expected earnings figures in each of the last four quarters while revenue beat consensus in three of the last four quarters,” noted analysts at Trefis.

“In the past year the company has increased its investment in R&D and capex and since October has acquired seven companies focused on hybrid cloud and AI. As the pace of vaccination increases and countries are opening up, we expect the momentum to continue in the second-quarter FY2021 results as well. Our forecast indicates that IBM’s valuation is around $140 per share, which is in line with the current market price of $140.”

Check out FX Empire’s earnings calendar

With Cloud and Ai, Ibm Broadens 5g Deals With Verizon and Telefonica

By Clara-Laeila Laudette and Supantha Mukherjee

Big technology players such as Microsoft and Amazon are vying for a share of 5G revenue by offering telecom operators next-generation software tools.

IBM, using technology it obtained from buying software firm Red Hat, will offer the telecom operators cloud services to run their networks and assist them in selling products tailored to customers. No financial terms were disclosed about the tie-ups, which broadened IBM’s existing partnerships with the two firms.

A cloud platform uses software instead of physical equipment to perform network functions, helping telecom operators build 5G networks faster, reduce costs and sell customised services.

“It’s a disruptive time in this particular market segment, telcos are trying to position themselves as the destination for services like augmented reality, machine learning and AI,” Darell Jordan-Smith, vice president of Redhat, told Reuters.

On the AI front, IBM and Spain’s Telefonica have created a virtual assistant that they say will remove friction points, such as long wait times, by automating the handling of frequently asked questions and tasks like billing.

“We see this as an existential moment for telco operators with 5G: architecturally, they’re looking to gain more control on their platforms and rethink their network as a digital world rather than a structured physical model,” said Steve Canepa, IBM’s general manager for communications business.

(Reporting by Clara-Laeila Laudette and Supantha Mukherjee in Barcelona)