Best Airline Stocks To Buy In May

Key Insights

  • Earnings estimates for leading airline stocks keep moving higher. 
  • Analysts expect that airline companies have enough pricing power to offset the negative impact of higher fuel prices. 
  • The market also expects a robust rebound of internatinal and business travel, which is bullish for airline stocks.

Airline stocks have recently pulled back due to general market pressure, but the leading stocks in the industry continue to trade well above yearly lows as traders expect strong demand during the summer season.

Delta Air Lines

Analyst estimates for Delta Air Lines contine to move higher at a robust pace. Currently, the company is expected to report earnings of $2.83 per share in 2022 and $6.21 per share in 2023, so the stock is trading at less than 7 forward P/E.

This cheap valuation could be explained by the general market weakness. In addition, some traders are worried that rising oil prices will ultimately hurt profitability, so analysts would have to revise their profit forecasts.

However, it looks that pent-up demand for travelling is strong, so Delta Air Lines should have enough pricing strength to offset the negative impact of rising fuel costs.

Southwest Airlines

The big picture is similar for Southwest Airlines. Analysts estimates have recently moved to new highs due to strong pricing and expectations of the recovery of international and business travel.

The company is expected to report earnings of $2.43 per share this year and $3.77 per share in the next year, so the stock is trading at 12 forward P/E. This is expensive compared to Delta Air Lines, but the premium is explained by Southwest’s lower debt levels, which make it a safer investment.

It should be noted that both stocks have easily outperformed S&P 500 this year, and it looks that they will remain strong performers unless we see a major rally in the oil market.

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

Delta Air Lines Is Up By 5%, Here Is Why

Key Insights

  • Delta Air Lines beats analyst estimates on both earnings and revenue. 
  • The company mentions “a strong rebound in demand”. 
  • Airline stocks have a good chance to gain additional upside momentum as traders focus on the upcoming summer season. 

Delta Air Lines Stock Rallies After Strong Earnings Report

We have recently discussed the best airline stocks, and now we have a chance to take a look at the earnings report from one of the leaders in this segment, Delta Air Lines.

Delta Air Lines reported revenue of $9.35 billion and an adjusted loss of $1.23 per share, beating analyst estimates on both earnings and revenue.

The company noted that the strong rebound in demand provided Delta Air Lines with an opportunity to return to profitability in March.

Traders rushed to buy Delta Air Lines stock as the company’s comments highlighted strong demand. Other airline stocks, like Southwest Airlines and United Airlines, have also gained strong upside momentum today.

What’s Next For Delta Air Lines Stock?

The market’s key concern is the impact of rising oil prices on airlines’ profitability. The main question is whether demand is strong enough to offset the negative impact of rising costs.

Delta Air Lines’ report shows that demand rebounds at a robust pace, so it’s not surprising to see that the company’s stock enjoyed strong support today. At this point, the near-term financials are not important as the market is focused on the company’s future performance.

In the next year, Delta Air Lines is expected to report earnings of $5.55 per share, so the stock is trading at roughly 7 forward P/E, which is cheap for the current market environment. Importanly, analyst estimates have started to move higher, which may provide more support to the stock in the upcoming trading sessions.

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

Best Airline Stocks To Buy Now

Key Insights

  • The recent pullback in the oil market provides support to airline stocks ahead of the earnings season. 
  • The upcoming report from Delta Air Lines will determine investors’ mood for the next few weeks. 
  • The key question is whether pent-up demand is strong enough to offset the impact of rising costs. 

WTI oil has recently moved below the $100 level amid concerns over coronavirus lockdowns in China. This move provided some support to airline stocks, which have been under pressure for many months due to rising costs. Let’s take a look at several airline stocks at the start of the first-quarter earnings season.

Delta Air Lines

Delta Air Lines will release its earnings report on April 13, and its stock will likely be active ahead of the earnings report. The company is expected to report a loss of $1.26 per share, but the market will likely stay focused on the comments about the company’s future performance.

Pent-up demand should serve as the bullish catalyst for Delta Air Lines and other stocks in the industry, but it is not clear whether it will be able to offset the negative impact from rising costs. The upcoming report should provide more information on this issue.

Southwest Airlines

Southwest Airlines is another leading airlines stock that could benefit from the recent pullback in the oil market. The stock is down by just 4% year-to-date, which indicates that many investors remain ready to bet on the stock despite the recent developments in the oil market.

Most likely, investors and traders would prefer to bet on bigger companies in the current market environment, which should benefit Southwest Airlines.

The recent action in Jetblue Airways shares highlights this thesis. Jetblue announced that it would buy Spirit Airlines and was immediately punished by the market, which believed that positions of bigger airlines would remain strong in any case and that Jetblue would have been better off concentrating on its existing business.

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

Why Delta Air Lines Stock Is Up By 9% Today

Key Insights

  • Airline stocks enjoy strong support at WTI oil attempts to settle below the $95 level.
  • Delta Air Lines says that demand stays strong and customers are ready to pay higher fares.
  • Traders should pay attention to the dynamics of Delta Air Lines’ earnings estimates.

Delta Air Lines Stock Rallies As WTI Oil Tests The $95 Level

Shares of Delta Air Lines gained strong upside momentum as WTI oil declined below the $95 level amid hopes for progress in Russia – Ukraine negotiations. Other stocks in the airline segment, like United Airlines Holdings or Southwest Airlines, are also moving higher in today’s trading session.

Airline stocks have taken a significant hit when WTI oil moved towards the $130 level, but the recent strong pullback in the oil market has finally provided material support.

Oil is moving lower as sanctions on Russia did not lead to a complete halt of Russian energy exports, and it looks that energy markets are relieved that the worst-case scenario has not materialized.

It is not surprising to see that Delta Air Lines stock rallied after oil settled below the psychologically important $100 level as energy prices are a key component of the company’s costs.

What’s Next For Delta Air Lines Stock?

Analyst estimates for Delta Air Lines’ earnings have been moving lower in recent weeks due to higher oil prices. Currently, Delta Air Lines is expected to report earnings of $1.65 per share in 2022 and $5.52 per share in 2023, so the stock is trading at 6 forward P/E for 2023.

Today, Delta Air Lines noted that customers were still willing to pay higher prices due to pent-up demand for international travel. These comments provided additional support to Delta Air Lines stock. However, it remains to be seen whether they will provide enough support to analyst estimates which may continue to move lower despite the recent pullback in the oil market as oil prices remain at high levels.

In the near term, Delta Air Lines stock will likely remain highly sensitive to the dynamics of the oil market. In the longer term, traders will pay attention to the dynamics of earnings estimates. If earnings estimates stabilize and start to move higher, the stock will get additional support.

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

Why United Airlines Stock Is Up By 12% Today

Key Insights

  • Oil’s pullback from recent highs provides support to airline stocks. 
  • Earnings estimates will be cut aggressively if oil settles at current levels.
  • Traders should monitor the dynamics of longer-dated oil futures to evaluate market sentiment.

United Airlines Stock Rallies As Oil Pulls Back From Highs

Shares of United Airlines gained strong upside momentum as WTI oil pulled back below the $120 level. Other stocks in the segment like Southwest Airlines or Delta Air Lines have also enjoyed strong support today.

High fuel prices put direct pressure on airlines, so any normalization on this front is bullish for United Airlines and other airline stocks. However, it is too early to tell whether the oil market has calmed down as the current move may be caused by profit taking after the strong rally.

United Airlines stock is down by more than 15% year-to-date, but it remains to be seen whether it will attract speculative traders in case oil prices stay near current levels.

What’s Next For United Airlines Stock?

Analysts expect that United Airlines will report a loss of $0.85 per share in the current year and a profit of $6.62 per share in the next year, so the stock is trading at less than 6 forward P/E.

However, analyst estimates have been moving lower in recent months, and this trend will be continued due to high oil prices. The key question is whether the market will see the current disruption as a longer-term problem.

At this point, crude oil futures indicate that traders expect prices near the $90 level at the end of 2022. In case the price of longer-dated futures contracts moves above the $100 level, airline stocks will find themselves under strong pressure as analysts will likely cut their forecasts aggressively.

In this light, traders will stay focused on geopolitical developments. In case the situation normalizes, energy markets will have a chance to get closer to the previous levels. However, if geopolitical tensions escalate, the situation in the energy markets may get out of control and hurt airlines through lower demand and higher costs.

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

South Airlines Stock Plunges After Cutting Full-Year Guidance on Omicron

South Airlines shares fell over 1% on Thursday after the world’s largest low-cost carrier lowered its full-year 2022 outlook on the impact of Omicron despite a rebound in holiday travel helped the company post its first quarterly profit in two years.

The Texas-based carrier reported quarterly adjusted earnings of $0.14 per share, beating the Wall Street consensus estimates of $0.7 per share. The airline said its revenue jumped over 150% to $5.05 billion from a year ago but decreased nearly 12% compared with the same period in 2019 due to the impact of the pandemic. That too topped the market expectations of $5.01 billion.

Fourth-quarter 2021 operating revenues per available seat mile were 13.77 cents, a decrease of 3.8%, driven primarily by a passenger revenue yield decrease of 4.1% and a load factor decrease of 2.1 points, compared with the same period in 2019.

The Omicron coronavirus variant is depressing revenue once again and driving up costs for South Airlines in the current quarter through March. However, the company expects to be profitable for the remaining three quarters of 2022 as well as for the entire year, Reuters reported.

Southwest Airlines stock fell over 1% to $43.23 on Thursday. The stock rose over 2% so far this year after falling over 8% in 2021.

Analyst Comments

Southwest Airlines (LUV) reported adj 4Q21 EPS of $0.14 in line with our estimate. There were several positive takeaways in the quarter, but omicron in late December / early January impacted results and losses are expected for January and February. Fuel hedging helped in the quarter. The month of March should be profitable; the June quarter should be a return to profitability,” noted Helane Becker, equity analyst at Cowen.

“The shares of Southwest Airlines are likely to reflect 1Q22 guidance where management forecasts revenue to decline by 10% to 15% from 2019 levels. Southwest reduced 1Q22 capacity by 9% when compared to 1Q19 to reflect January flight cancellations related to omicron and the likely recovery during the quarter. The load factor is forecast to be 75% to 80%. Capacity was previously forecast to be down 6% v 1Q19.”

Southwest Airlines Stock Price Forecast

Fourteen analysts who offered stock ratings for Southwest Airlines in the last three months forecast the average price in 12 months of $54.54 with a high forecast of $65.00 and a low forecast of $36.00.

The average price target represents a 24.78% change from the last price of $43.71. Of those 14 analysts, eight rated “Buy”, five rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $65 with a high of $100 under a bull scenario and $35 under the worst-case scenario. The investment bank gave an “Overweight” rating on the airline’s stock.

“Why Overweight? Southwest Airlines (LUV) is arguably the highest quality airline in the US with a good balance sheet and high margins. As a largely US domestic medium-haul airline, we believe its network is in a sweet spot for a COVID rebound and it has one of the attractive loyalty programs with a loyal customer base,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“All of these not only make Southwest Airlines (LUV) a strong defensive airline but it also has the ability to play offence with the MAX rollout, corporate/GDS integration and growth opportunities.”

Several other analysts have also updated their stock outlook. Berenberg cut the target price to $62 from $70. Barclays lowered the target price to $59 from $65. BofA Global Research slashed the price objective to $55 from $61. Bernstein cut the target price to $60 from $65.

Technical analysis suggests it is good to sell as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong selling opportunity.

Check out FX Empire’s earnings calendar

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

 

Sector Themes In Play In The Markets For 2022

Years like 2021 saw a solid broad-based performance in many stock market sectors. Relatively simple approaches such as Indexing and Sector Rotation did well. But with macro changes in play and many uncertainties for 2022, we may very well see broad indexes underperforming while individual sectors dominated by a few stocks really shine.

Dips will continue to be bought unless something significant changes. But let’s not forget that we’re long overdue for a substantial correction. Significant risk catalysts are:

  • Fed actions.
  • International conflicts (i.e., Russia and China).
  • Pandemic developments that are not currently known.

There’s always the risk of the unknown – the literal definition of a “Black Swan” event. We shouldn’t get too complacent, knowing that we may need to get defensive to protect capital suddenly. When it’s time to be defensive, let’s not forget that CASH IS A POSITION!

Sector theme DRIVERS FOR 2022

Many uncertainties about Covid and the lingering effects on the economy remain. Inflation has roared back to 30-year highs. Strong employment numbers and consumer spending are fueling significant growth in corporate earnings. We also have a shift in bias at the Fed on interest rates and quantitative easing. These are the “knowns” and are theoretically priced in.

For these reasons and more, we should expect more of a “Stockpicker’s Market” in 2022. Certain sectors will do well and weather corrections better than the broader markets.

Even short-term traders can gain an edge by paying attention to what sectors are strongest. Traders tend to benefit most from playing the strongest stocks in the strongest sectors for bullish trades and choosing the weakest stocks in weaker sectors for bearish trades. That “tailwind” can make a significant difference in results.

Let’s look at some sector themes and individual names to keep an eye on in 2022.

ECONOMIC NORMALIZATION

A long-anticipated return to a “normal” economy will continue to be a theme — we just don’t know if that will be Post-Covid or Co-Covid. Or when. Air travel, theme parks, hotels, cruise lines, etc., have all suffered in the persistent Pandemic. What does seem to be changing is the idea of a “new normal” where virus variants may be with us for years to come. We will adjust socially and economically to that for the foreseeable future. DAL, UAL, LUV, AAL are airlines to watch, and the JETS ETF may be a good way to play a general recovery in this sector.

5G INTERNET

The much-hyped rollout of 5G network technology had its share of setbacks and technology disappointments. But 2022 should see the 5G deployment start to take off as technical issues are worked out, and the promise of widespread coverage with transformational performance becomes real. In the background supplying the 5G infrastructure are AMD, QCOM, ADI, MRVL, AMT, XLNX, and KEYS. Along with infrastructure and testing companies, shares of major carriers T, TMUS, and VZ languished for much of the second half of 2021 and looked poised for recovery in the coming year.

ARTIFICIAL INTELLIGENCE

In all its various forms (including autonomous vehicles), AI will remain a developing trend. Big players in the space to watch include MSFT, AMAT, GOOGL, NVDA, AAPL, and QCOM.

EVs and AUTONOMOUS VEHICLES

Electric Vehicles (EVs) are nearing an inflection point where widespread adoption is poised to take off. Technology and cost competitiveness has improved where some EVs will reach price parity with their traditional internal combustion counterparts.

While there are many smaller players in the EV space, automotive stalwarts F, GM, and TM are investing very heavily. TSLA has been grabbing the headlines, but many others want to stake out their territory in the space, including whole tiers of manufacturers and infrastructure enablers like WKHS, XPEV, NKLA, and CHPT.

MATERIALS and MINING

Gold, silver, and related miners underperformed for much of 2021 and now look poised for a recovery year as inflation, and monetary concerns grow. GLD, SLV, GDX, GDXJ, SIL, SILJ look good as both longer and mid-term plays. Metals and miners may get hit initially with a significant downturn in stocks but could ultimately demonstrate their safe-haven potential.

Specific to the growth in EVs, battery technology, etc., copper, lithium, and related basic materials should see stronger demand ahead. FCX looks particularly interesting as a dual play on gold and copper. LIT may be a good ETF play on lithium battery technology.

SEMICONDUCTORS

The market for chips is primed for exponential growth. EV’s have about ten times the number of specialty semiconductors as conventional vehicles. AI, crypto, 5G, mobile devices, and ubiquitous computing should drive growth in the semiconductor sector for some time to come.

REAL ESTATE

Real Estate and Homebuilders should continue to do well while employment numbers remain strong and if interest rates don’t rise too quickly. The inventory shortage in most real estate markets will likely persist well into the new year.

Storage REITs like PSA, LSI, and CUBE have been big winners in the Covid economy and still have room to run.

SUMMARY

Many sectors still look bullish after gains in 2021. But there are “storm clouds” on the horizon, and we must not take future performance for granted.

Lastly, one of the simplest ways to assess how sectors are measuring up is to watch the charts for the S&P SPDR series sector ETFs and a few others. Here are some notable ones to watch:

https://www.thetechnicaltraders.com/wp-content/uploads/2021/12/Dec-31-article.png

These can give us a good starting place to look for leading stocks in winning sectors as the year unfolds.

Let’s remain vigilant for possible market corrections and may the wind be at our backs!

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Founder & Chief Market Strategist
TheTechnicalTraders.com

 

Airline, Cruise Stocks Suffer as Omicron Spike Chokes Holiday Travel

Airline and cruise stocks tumbled on Wednesday after continued flight cancellations and sailing halts due to adverse weather conditions and the ongoing COVID-19 crisis caused by the spread of the Omicron variant.

According to Reuters, flight-tracking website FlightAware.com reported that nearly 800 U.S. airlines cancelled flights Wednesday morning, and 1,120 flights were delayed. On Tuesday, Delta Air Lines and Alaska Air Group cancelled hundreds of flights, while Southwest Airlines cancelled only a few flights. This was caused by adverse weather conditions and an increase in Omicron cases.

“As European nations mull tighter restrictions to contain the spread of the Omicron variant, experts anticipate a similar trend in the U.S. and across the world in the coming months. As investors speculate a slower recovery timeline for the travel industry, the shares of Southwest Airlines have lost a quarter of their value since November,” noted analysts at TREFIS.

“However, the passenger numbers at TSA checkpoints are just 15% below pre-pandemic levels – indicating strong air travel demand despite heightened fears and tougher Covid norms. Notably, Southwest Airlines stock has lost $11 billion in market capitalization since February 2020 despite burning just $1.1 billion of operating cash over the period. Also, the domestic business contributes almost 97% of Southwest’s revenues and is likely to support earnings amid international travel blockades. Considering the negative impact of the Omicron variant for a quarter, Trefis believes that there is a sizable upside in Southwest Airlines stock.”

On Wednesday, Delta Air Lines stock closed 1.21% lower at $39.15, Alaska Air Group ended 1.46% down at $52.13 and Southwest Airlines finished 0.31% lower at $42.16.

In addition to cancelling 170 flights, Alaska Airlines has warned of more cancellations and delays throughout the week, while Delta plans to cancel 250 of 4,133 flights on Tuesday.

Moreover, Cunard, a cruise company owned by Carnival Corp., announced that the Queen Mary 2 would skip a scheduled stop in New York and instead remain in Barbados until Jan. 2. On Wednesday, Carnival Corp closed 0.48% lower at $20.80, Norwegian Cruise Line ended 1.53% down at $21.57 and Royal Caribbean down 0.04% at $78.22.

According to the US Centres for Disease Control and Prevention (CDC) as of Tuesday, 86 ships had been investigated, and three more were being monitored for cases of COVID-19. As a precautionary measure, the company added more crew members but did not elaborate on why more workers were needed.

A temporary ban on cruising may be reintroduced by U.S. health authorities as a result of the spread of the Omicron variant, just months after cruise companies resumed operations.

Check out FX Empire’s earnings calendar

Why Delta Air Lines Stock Is Under Pressure Today

Delta Air Lines Stock Is Losing Ground After Turbulent Weekend For Airlines

Shares of Delta Air Lines found themselves under pressure after flight cancellations during the Christmas weekend highlighted the risks posed by the spread of Omicron.

Most airlines blamed staffing shortages due to coronavirus for their problems. Not surprisingly, the whole sector is under pressure today, and other stocks like United Airlines, Southwest Airlines and JetBlue are also losing ground in today’s trading session.

It remains to be seen whether this problem will be a long-term one as Christmas weekend is one of the busiest periods for the airline industry, and the situation will likely normalize in the upcoming weeks. However, the disruptions highlighted risks posed by Omicron, and investors may remain worried about similar incidents in the future.

What’s Next For Delta Air Lines Stock?

Analysts expect that Delta Air Lines will report a loss of $4.28 per share in 2021 and a profit of $2.91 per share in 2022, so the stock is trading at roughly 13 forward P/E.

However, it should be noted that earnings estimates for 2022 have been steadily declining in recent months. The reason for this decline is simple – the situation with coronavirus is not improving, while the wave of Omicron boosted risks of additional restrictions, especially for the lucrative international travel segment.

It remains to be seen whether traders will rush to buy shares of Delta Air Lines and other airline stocks after the recent pullback. While airlines should quickly adapt to new challenges as they have a significant experience of dealing with various crises, falling earnings estimates may continue to put pressure on their stocks. The good news for investors is that there is no evidence of big problems on the demand side as pent-up demand for travelling stays strong despite risks posed by the spread of Omicron.

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

Southwest Airlines Lower Despite Guidance Boost

Southwest Airlines Inc. (LUV) is trading lower despite raising Q4 2021 revenue guidance in reaction to strong Thanksgiving traffic and higher-than-expected leisure bookings that have defied Omicron-induced travel fears. The carrier now expects quarterly revenue to decline 10-15% compared to prior expectations for a 15-25% decline. Revised estimates of $4.86 to $5.15 billion marks an improvement of $210 to $500 million compared to previous guidance.

Millions Tuning Out Pandemic Decrees

The stock posted a 52-week low at the start of December in reaction to fears that new travel restrictions would hurt the industry’s embryonic recovery. It’s bounced about three points since that time but hasn’t mounted previously broken support, indicating the selling wave that started in October remains fully intact. This weak performance makes perfect sense, with business travel delayed into 2022 as a result of the Delta outbreak and unknowns regarding Omicron.

The airline industry is benefiting from the decline in crude oil prices, which will also lower jet fuel costs. In addition, millions of folks have tuned out government pandemic decrees, for better or worse, and are committed with getting on with their lives despite the elevated risk. As a result, robust air travel bookings, especially in the United States, should continue into 2022 as long as the Biden administration doesn’t deliver a death blow through new restrictions.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Strong Buy’ rating based upon 12 ‘Buy’, 3 ‘Hold’, and no ‘Sell’ recommendations. Price targets currently range from a low of $48 to a Street-high $75 while the stock is set to open Wednesday’s session about $15 below the median $61 target and $3 below the low target. This depressed placement highlights chronic investor caution as a result of multiple pandemic waves and the reluctance of corporations to send their employees back into the friendly skies.

Southwest Airlines topped out in the low 60s in 2017 and failed breakout attempts in 2018, 2019, and early 2020. It fell to a 6-year low during March 2020’s pandemic decline and bounced, stalling at long-term resistance for the fourth time in March 2021. The selloff since that time bounced at the 50% rally retracement last week but long-term sell signals will remain intact until the stock remounts broken support between 47 and 51. That’s unlikely to happen until we get closer to the second quarter of 2022.

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. 

American Airlines Cancels More Flights; Total Tops 2,300

Staffing shortages have hit American Airlines, Southwest Airlines Co and Spirit Airlines Inc in particular, as they ramp up flights ahead of the holiday season but face problems finding enough pilots and flight attendants.

“Flight Attendant staffing at American is strained and reflects what is happening across the industry as we continue to deal with pandemic-related issues,” flight attendants’ union APFA said.

American’s pilot union said last month they planned to picket the carrier’s major hubs to protest work schedule, fatigue, and a lack of adequate accommodation this summer.

The cancellations are another setback to the Texas-based company, which is already reeling from rising fuel and labor costs impacting the industry as the U.S. prepares to open borders to fully vaccinated travelers.

“The airline had particular weather issues that then spiraled into rippled cancellations and were compounded by an inability to fill out schedules from their labor reserves,” UBS analyst Myles Walton said.

Severe winds at the Dallas/Fort Worth International Airport reduced American’s arrival capacity by more than half, with the inclement weather also impacting staffing.

The company, however, hoped some of that impact could be mitigated with nearly 1,800 flight attendants returning from leave starting Monday.

“We expect considerable improvement beginning today with some residual impact from the weekend,” company spokeswoman Sarah Jantz said in a statement. American’s shares recovered losses to trade up 1%.

Meanwhile, rival airlines seemed to have fared better.

Delta Air Lines Inc said on Monday it has not experienced any weather-related cancellations so far, while United Airlines said there were no “widespread cancellations”.

(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Arpan Varghese)

IBM Weighs on The Dow; Nasdaq and S&P Gain Ground

After hitting an intraday record on Wednesday the Dow pulled back, with IBM tumbling after missing Wall Street estimates for quarterly revenue as orders in one business segment declined ahead of a spinoff next month.

The benchmark S&P clocked its seventh straight session of gains and of its 11 major industry sectors consumer discretionary was the biggest percentage gainer during the session while energy stocks were declining the most as crude oil futures fell on concerns about demand.

“For the most part you’re dealing with a slightly risk-off day with people going back to more defensive sectors” including big technology companies, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

“You’re seeing oil down a little bit today so potentially there’s some global growth concerns. You’re seeing some inflation concerns as well.”

However, the CBOE Volatility index, also referred to as Wall Street’s fear gauge, hit its lowest point since early July during the session.

This suggests that investors do not see a big decline or upswing for stocks ahead despite concerns about supply-chain problems increasing costs, according to Shawn Cruz, senior market strategist at TD Ameritrade.

“The market may be saying the supply-chain issues that are driving up costs are going to be transitory because markets are discounting mechanisms they take what is expected that happen in the future, and assign a price right now,” Cruz said.

Cruz also pointed to earlier data showing that the number of Americans filing new claims for unemployment benefits dropped to a 19-month low last week, pointing to a tightening labor market.

According to preliminary data, the S&P 500 gained 13.32 points, or 0.29%, to end at 4,550.83 points, while the Nasdaq Composite gained 93.82 points, or 0.62%, to 15,215.50. The Dow Jones Industrial Average fell 7.38 points, or 0.02%, to 35,601.96.

Analysts were expecting S&P 500 third-quarter earnings to rise 33.7% year-on-year, with about 100 company reports in so far, according to the latest data from Refinitiv.

Tesla was the Nasdaq’s biggest boost during the session as investors digested the electric car maker’s upbeat earnings, despite a supply-chain warning.

American Airlines rose after the company posted a smaller-than-expected quarterly loss, while Southwest Airlines Co fell after it said it expected current quarter profit to remain elusive.

HP Inc gained as brokerages raised their price targets on the stock after the personal computer and printer maker forecast upbeat fiscal 2022 adjusted profit and raised its annual dividend.

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

(Reporting by Shreyashi Sanyal and Devik Jain in Bengaluru, Sinéad Carew in New York; Editing by Arun Koyyur and Matthew Lewis)

Marketmind: Back to The Blues

Markets are in a somber mood on Thursday.

There is little let up on the Chinese property sector front with investors wondering how much damage the Chinese economy might suffer from a potential default of embattled property giant China Evergrande Group – now possibly just days away.

Evergrande shares suffered a double-digit tumble after it scrapped a deal to sell a stake in its property group, though it also secured an extension on a defaulted bond, according to media reports.

Adding to the woes is resurgence of COVID-19 and ensuing curbs. Russia is suffering record deaths and has reported some COVID-19 infections with a new coronavirus variant believed to be even more contagious than the Delta one.

Poland is facing an explosion of cases that may require drastic action, according to its health minister, while Latvia starts its lockdown today until mid-November to slow a spike in infections.

Futures point to more pain ahead for U.S. stocks later in the day.

But a batch of fresh earnings results might sooth some frayed nerves.

Unilever and Hermes sales beat estimates, Truck maker Volvo profit beats forecast, but companies do flag lingering chip woes.

Barclays Q3 beats expectations on strong investment bank performance, while Anglo American Q3 production inches higher.

Earnings highlights in the U.S. to come today are Intel, AT&T and Danaher.

In emerging markets, Turkey’s central bank will take centre stage. Policy makers are expected to deliver another interest rate cut despite stubbornly high inflation after President Tayyip Erdogan’s midnight reshuffle of the monetary policy committee.

Key developments that should provide more direction to markets on Thursday:

-EU starts two day summit

-NATO defense ministers meet

-U.S. initial jobless claims/Philly Fed index/existing home sales

-U.S. 5-year TIPS auction

-Fed speakers: San Francisco President Mary Daly

-Emerging markets: Turkey, Ukraine central banks

-U.S. earnings: AT&T, Blackstone, Dow, American airlines, Southwest airlines, Alaska Air, Intel Whirlpool Mattell

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

(Reporting by Karin Strohecker)

Delta Air Lines’ Earnings To Swing to Positive Territory For First Time in Seven Quarters

Delta Air Lines’ earnings per share (EPS) is expected to swing back to positive territory for the first time in seven quarters on Wednesday, more than doubling to $0.16 per share compared to a huge loss of -$3.30 per share seen in the same period a year ago.

The Airline company, which provides scheduled air transportation for passengers and cargo throughout the United States and across the world, is forecast to report revenue growth of over 170% in the third quarter to around $8.4 billion. It is worth noting that in the last two years, the airline has beaten consensus earnings estimates just three times.

“Notably, all comparisons in percentage are made to third-quarter 2019. For the third quarter of 2021, the carrier expects capacity to decline in the 28-30% band from the number reported in third-quarter 2019. The carrier anticipates total revenues to drop in the 30-35% range from third-quarter 2019 actuals,” noted analysts at ZACKS Research.

“Non-fuel unit costs in third-quarter 2021 are expected to increase in the 11-15% band from the third-quarter 2019 actuals. Fuel price per gallon in the September quarter is projected in the $2.05-$2.15 range. Capital expenditures and adjusted net debt are likely to be around $800 million and $19 billion, respectively, in the September quarter.”

At the time of writing, Delta Air Lines’ was trading 0.98% lower at $43.25 on Friday. However, the stock rose over 7% so far this year.

Delta Air Lines Stock Price Forecast

Eighteen analysts who offered stock ratings for Delta Air Lines in the last three months forecast the average price in 12 months of $55.21 with a high forecast of $67.00 and a low forecast of $45.00.

The average price target represents a 27.39% change from the last price of $43.34. From those 18 analysts, nine rated “Buy”, nine rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $67 with a high of $96 under a bull scenario and $35 under the worst-case scenario. The firm gave an “Overweight” rating on the airline’s stock.

“Why Overweight? Delta Air Lines (DAL) has some of the strongest customer satisfaction numbers among the other Legacy peers, while also commanding a higher PRASM, making it our preferred Legacy carrier. While DAL cannot escape Legacy overhangs (delayed International/corporate recovery, strained balance sheet), it should rise with the industry tide. The risk-reward looks attractive,” noted Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. In July, Bernstein raised the target price to $65 from $64. In June, Jefferies lifted the price objective to $60 from $50. In April, Berenberg upped the price target to $48 from $40.

Analyst Comments

“Airlines will report 3Q21 results later this month, beginning Oct 13 with Delta Air Lines’ release. We believe 3Q21 started strong, sagged in the middle and then finished strong as people started planning holiday trips,” noted Helane Becker, equity analyst at Cowen.

“We believe 4Q21 guidance will reflect a strong peak, likely >2019 levels while off-peak is likely to lag 2019 levels. Stocks to own include United Airlines (UAL), Alaska Air Group (ALK), Allegiant Travel (ALGT) & Southwest Airlines (LUV).”

Check out FX Empire’s earnings calendar

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks turned lower on the heels of a record session for the S&P 500 and Nasdaq. Today the Dow Jones Industrial Average fell nearly 200 points while the S&P 500 and tech-heavy Nasdaq each fell about 0.6%.

The mood on Wall Street went south after a development out of Kabul in which U.S. troops and Afghans were killed in an explosion at the airport. Investors are also watching and waiting for Federal Reserve Chairman Jerome Powell to tip his hand on economic stimulus and inflation at the Jackson Hole symposium on Friday.

Stock index futures flipped green in extended-hours trading. The Dow, S&P 500 and Nasdaq all reclaimed some ground ahead of Friday’s session with all eyes on Jackson Hole.

Stocks to Watch

  • Shares of apparel retailer The Gap are rallying 6% in after-hours trading on better-than-expected quarterly results. Sales rose to more than USD 4 billion and The Gap also raised its full-year earnings outlook despite supply chain issues, the threat of the delta variant and inflation risks.
  • Southwest Airlines is trading lower after the company announced it would be slashing the number of flights starting next month. The company is changing its schedule in response to backlash from staff who were spread too thin. Southwest had already been suffering from weaker demand as a result of a spike in COVID cases.
  • Shares of meme stock AMC Entertainment tumbled 8% on the day. Shares were starting to recover with modest gains in the after-hours market and no clear catalyst either way.
  • Shares of U.S. automaker Ford fell 2% seemingly in response to chip problems that continue to plague the industry.
  • A technical glitch allowed FBI agents to view secret evidence data using Palantir Technologies software that they would otherwise not have been permitted to see.  On social media, users were quick to defend Palantir and blame the agents. Shares of Palantir gained 2% on the day.

Look Ahead

The Federal Reserve’s Jackson Hole meeting is in focus in anticipation of chairman Powell’s speech. The theme of this year’s symposium, which will take place virtually, is “Macroeconomic Policy in an Uneven Economy.”

Despite Thursday’s declines, the three major stock market indices are poised to finish the month of August with gains.

Southwest Airlines Lowers Q3 Revenue Guidance

Southwest Airlines Co. (LUV) is trading lower on Wednesday after warning about Q3 2021 revenue due to “close-in’ cancellations and bookings as a result of the Delta variant. The news is bearish for the broader airline industry, for two reasons. First, it tells us that leisure travelers are having second thoughts about vacations and trips to see grandma while second, it defies predictions that widespread business travel would resume in the fourth quarter.

Red Flag for Airline Industry

The airline has outperformed its peers since March 2020, with a domestically-focused schedule avoiding the gauntlet of international travel restrictions. The recovery wave reached the 2018 peak in March 2021 before reversing, unlike American Airlines Group Inc. (AAL), United Airlines Holdings Inc. (UAL), and Delta Air Lines Inc. (DAL), which stalled well below similar levels. In turn, this raises odds that rivals will follow with identical warnings in coming weeks.

According to the release, Southwest “recently experienced a deceleration in close-in bookings and an increase in close-in trip cancellations in August 2021, which are believed to be driven by the recent rise in COVID-19 cases associated with the Delta variant. Based on the assumption that COVID-19 cases remain elevated in the near-term and current revenue trends in August continue into September, the current outlook for Q3 2021 operating revenues has worsened by an estimated three to four points.”

Wall Street Asleep at the Wheel

Wall Street consensus has ignored the Delta variant, with a ‘Buy’ rating based upon 16 ‘Buy’, 3 ‘Overweight’, and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders reduce positions or move to the sidelines. Price targets range from a low of $57 to a Street-high $85 while the stock is set to open Wednesday’s session about $7 below the low target. This disconnect indicates that Main Street understands the current risks better than the analyst community.

Southwest posted an all-time high at 66.99 in December 2017 and entered a trading range that broke to the downside in February 2020, dropping the stock to a 6-year low. The subsequent uptick stalled within three points of that peak in April 2021, giving way to a correction that pieced the 200-day moving average in the 50s in July. Two tests at that level have failed while this morning’s decline is holding within a short-term trading range. Accumulation has dropped to a 52-week low, raising odds for continued downside into the lower 40s.

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. 

Stalling Signs? Taking a Look Under the Hood of US Equities

Greetings. I hope this article finds you and yours well. Today, we are taking a look at some additional market indicators and internals to get an unbiased perspective on things.

First, I want to preface things by mentioning that I am not suggesting that I am fully bearish on the S&P 500 or stocks right now. However, I am taking more of a cautious stance at the moment.

 

Figure 1 – S&P 500 Index April 15, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Nothing new to see here. Just another pedestrian pullback to the 50-day SMA and a bounce back. This pattern has repeated itself several times since the pandemic lows in the $SPX. It won’t repeat itself forever – that would be too easy.

Since it is earnings season, let’s talk earnings multiples.

Feeling bullish? It can be challenging to get excited about an $SPX at 4400 with an estimated 46.40 P/E ratio (trailing twelve months). We are in the middle of earnings season, so we will have a clearer figure soon.

Figure 2 – S&P 500 PE Ratio 1870 – July 22, 2021. Source multpl.com

Stocks are not cheap by any measure, folks. However, with easy monetary policy and low rates, this is to be expected. What could be the catalyst to derail this freight train?

How about the Dow Transports? This index used to be talked about much more frequently and is followed closely by students of Dow Theory. We just don’t hear much analysis about it on Fox Business, CNBC, or Bloomberg these days.

The Dow Transports (Dow Jones Transportation Average) $TRAN is an index comprised of 20 companies.

Here are the index components and weighting as of December 2020:

Alaska Air Group, Inc. 2.55%

American Airlines Group Inc. 0.76%

Avis Budget Group, Inc. 1.80%

C.H. Robinson Worldwide, Inc. 4.61%

CSX Corporation 4.39%

Delta Air Lines, Inc. 1.94%

Expeditors International of Washington, Inc. 4.61%

FedEx Corporation 13.10%

J.B. Hunt Transport Services, Inc. 6.70%

JetBlue Airways Corporation 0.70%

Kansas City Southern 9.73%

Kirby Corporation 2.51%

Landstar System, Inc. 6.60%

Matson, Inc. 2.79%

Norfolk Southern Corporation 11.42%

Ryder System, Inc. 3.12%

Southwest Airlines Co. 2.26%

Union Pacific Corporation 9.91%

United Airlines Holdings, Inc. 2.11%

United Parcel Service, Inc. 8.39%

Figure 3- Dow Jones Transportation Index January 4, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Here, and in contrast to the Dow Jones Industrial Average, we can see that the Transports topped back on May 10, 2021. Proponents of Dow Theory would argue that this creates a lack of confirmation and that the subsequent highs in the Dow Jones Industrial Average are not valid due to this lack of confirmation.

What could be the reason for the stall in the Transports? Input Costs? While fuel costs have risen, what about the rise in retail spending? Is the stimulus-powered consumer pocket not enough to counterbalance the rising input costs?

If input costs are the reason for the stalling, what about the other companies that rely on raw materials to make their products? Recent inflationary data has not affected these companies’ stock prices yet (for the most part).

What if the Fed eases off the gas pedal?

While it is very difficult (if not impossible) to pick market tops (and I don’t advocate trying to do that), it is wise to look at certain market indicators to get an understanding of what is going on beneath the surface.

It is easy to look at the chart of the $SPX and see that it is moving higher, from the bottom left-hand corner of the chart to the top right-hand corner. However, that does not tell the whole story of what is happening in the US equity markets.

We will be monitoring the above and previously mentioned market internals and indicators for more clues in the coming days, weeks, and months. I think it is critical to be aware of metrics such as the above as the broader indices trade near all-time highs.

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

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

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This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

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.

Southwest Airlines Ceo Gary Kelly to Step Down

Kelly, 66, who became the CEO in 2004, has led Southwest through some of the airline industry’s most turbulent times including the coronavirus crisis that hammered travel demand.

As CEO, he spearheaded several initiatives, including the acquisition of AirTran Airways, the launch of international destinations for the first time in Southwest’s history, and the introduction of the Boeing 737 MAX 8 into the airline’s fleet, the company said.

Jordan, 60, joined the airline in 1988, and has served in roles including director of revenue accounting and corporate controller, among others. He will take charge effective Feb. 1, 2022.

Southwest’s shares fell about 1% in early trading. The stock has more than tripled in value during Kelly’s tenure.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila)