US Stock Index Futures Testing Record Highs as Earnings Season Continues

U.S. stock futures are edging higher in overnight trading on Wednesday following a flat opening after the major cash market averages hit record highs on inauguration day.

At 07:21 GMT, benchmark S&P 500 Index futures are up 0.27%. The blue chip Dow Jones Industrial Average is trading higher by 0.16% and the tech-based NASDAQ Composite is up by 0.49%.

The early price action indicates investors have moved on from the bearish earnings report released by United Airlines after the close on Wednesday.

Major airline United dipped more than 2% in extended trading on Wednesday after missing on the top and bottom lines of its quarterly earnings. The airline warned sales would continue to suffer in the early part of 2021 as the coronavirus pandemic drags on.

Earnings season continues on Thursday with Baker Hughes, Union Pacific and Citrix reporting before the bell. Intel, IBM and CSX report after the closing bell on Thursday.

In economic news, the Labor Department will release last week’s jobless claims data at 13:30 GMT on Thursday. Economists polled by Dow Jones expect 925,000 Americans filed for unemployment last week, down from the previous week’s 965,000.

Wednesday Recap

U.S. equities rose to record highs on Wednesday as the latest batch of strong corporate earnings rolled in, as Joe Biden was sworn in as commander in chief.

The S&P 500 Index climbed 1.4%, notching an all-time high. The Dow Jones Industrial Average rose more than 250 points to close at a record and the NASDAQ Composite surged nearly 2%, closing at a record. The technology heavy index was helped by a 16% jump in Netflix’s stock on the back of the streaming giant’s strong earnings and subscriber results.

The rest of the FAANG group, due to report results in the coming weeks, jumped with Facebook Inc, Amazon.com Inc, Apple and Google-parent Alphabet Inc rising between 2% and 5%.

Eight of the 11 S&P sectors advanced in afternoon trading, with technology, communication services and consumer discretionary among the biggest gainers.

The broader banks index, however, shed about 1.6%, declining for the third day.

Earnings Results

Morgan Stanley edged higher after its quarterly profit blew past estimates driven by strength in its trading business.

Procter & Gamble Co raised its full-year sales forecast for a second time as it benefited from sustained coronavirus-driven demand for cleaning products. Its shares, however, slipped about 1.4% after it warned that the pace of sales might slow as vaccines roll out.

UnitedHealth Group Inc slid 0.3% after the health insurer’s quarterly profit slumped nearly 38%, weighed down by costs related to its programs to make COVID-19 testing and treatment more accessible for its customers.

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

United Airlines Shares Slump on Deep Quarterly Loss; Lost $7.1 Billion in 2020

United Airlines reported worse-than-expected earnings in the fourth quarter with net loss ballooning to $1.9 billion and to $7.1 billion for the full-year 2020 as the COVID-19 pandemic restrictions hammered air travel demand, sending its shares down about 3% in extended trading on Wednesday.

Chicago, Illinois-based airline reported fourth-quarter adjusted net loss of $2.1 billion, or a loss of $7 per share. That missed Wall Street’s estimates for a loss of $6.56 per share. The airlines’ reported loss of $7.7 billion for the full-year 2020 and total operating revenue declined 69% to $3.4 billion from the same quarter in 2019.

“Domestic remained the relative source of strength for the airline, as revenues fell 72% compared to international down 83%. The one source of relative strength on the international side was Latin America, which saw revenues decline by just 65% y-o-y as leisure demand to the region has remained strong. Cargo revenue was another source of strength, increasing 77% y-o-y, with other operating revenue declining by 31% y-o-y,” wrote Sheila Kahyaoglu, equity analyst at Jefferies.

The airline which operates a large domestic and international route network spanning cities large and small across the United States and all six continents said over the last three quarters, the company has identified $1.4 billion of annual cost savings and has a path to achieve at least $2.0 billion in structural reductions moving forward.

United Airlines forecasts the first quarter 2021 total operating revenue to be down 65-70% versus the first quarter of 2019. Accelerated distribution of the COVID-19 vaccine may lead to faster improvement, however, the company is not including this potential improvement in its first-quarter 2021 revenue outlook. The airline forecast first-quarter 2021 capacity to be down at least 51%.

United Airlines shares slumped about 3% to $43.97 in extended trading on Wednesday; the stock plunged 50% in 2020.

Analyst Comments

“United reported 4Q20 adjusted EPS slightly below our and Street expectations. Near term revenue trends are slightly worse than expected, but likely not a major focus for investors. Management targeted +$2 Bn in annual costs savings that should allow them to exceed2019 EBITDA margins by 2023. Many will look for comments on summer bookings as a snapback in 2H21 travel is expected,” said Helane Becker, equity analyst at Cowen and company.

“Trading activity will likely hinge on management comments about summer bookings and if they’ve seen any increased activity to support the idea of pent-up demand. The idea of a strong 2H21 will be dictated by vaccine distribution, something the Biden administration should push aggressively early in his administration.”

United Airlines Stock Price Forecast

Thirteen analysts who offered stock ratings for United Airlines in the last three months forecast the average price in 12 months at $48.91 with a high forecast of $62.00 and a low forecast of $32.00.

The average price target represents an 8.26% increase from the last price of $45.18. From those 13 analysts, four rated “Buy”, five rated “Hold” and four rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $37 with a high of $79 under a bull scenario and $21 under the worst-case scenario. The firm currently has an “Underweight” rating on the airline holding company’s stock.

“Why Underweight? We believe United Airlines (UAL) has the most challenged network of any airline in our coverage based on our path for a COVID-19 recovery and a levered balance sheet, which could limit rebound opportunities. In addition, UAL’s new CEO Scott Kirby (former COO) is very well regarded by investors but investors may wait to see evidence that UAL is indeed focused on cost improvement rather than aggressive growth (at the cost of PRASM) before giving the stock credit,” said Ravi Shanker, equity analyst at Morgan Stanley.

Several other analysts have also recently commented on the stock. Stifel raised the target price to $47 from $33. Cowen and company upped to outperform from market perform, raising the price objective to $53 from $34. BNP Paribas issued an “underperform” rating and a $32 target price for the company. Citigroup reduced their price target to $43 from $47 and set a “buy” rating.

In addition, Zacks Investment Research downgraded to a “sell” rating from a “hold” and set a $38 price target. Jefferies Financial Group issued a “hold” rating and a $45 price target. At last, Exane BNP Paribas issued an “underperform” rating and a $32 price target for the company.

Check out FX Empire’s earnings calendar

Procter & Gamble Raises FY2021 Guidance; Stock Has 20% Upside Potential

Procter & Gamble, the world’s largest maker of consumer packaged goods, reported better-than-expected earnings in the fiscal second quarter and said it has raised its outlook for fiscal 2021 all-in sales growth to a range of 5-6% from the previous forecast of 3-5%.

Cincinnati, Ohio-based consumer goods corporation said its net sales rose 8% to $19.7 billion in the second quarter fiscal year 2021. Diluted net earnings per share increased 4% to were $1.47 and Core-EPS surged 15% to $1.64, beating the Wall Street consensus estimate of $1.51 per share.

Procter & Gamble raised its outlook for organic sales growth to a range of 5-6% from 4-5%. The Company said it now expects fiscal 2021 GAAP diluted net earnings per share growth in the range of 8-10% from fiscal 2020 GAAP EPS of $4.96. In addition, P&G upgraded their guidance for core earnings per share growth to a range of 8-10% from 5-8% versus fiscal 2020 core EPS of $5.12.

Procter & Gamble’s (PG) strong quarter should lift shares, improve sentiment for (lagging) HPC group -stock remains a Franchise Pick. We are focused on a “stronger for longer” theme in HPC w/ ’21 a transition year as the public gradually overcomes its trepidation toward the vaccine, though certain consumer behaviours sustain (cleaning, health & wellness, etc.), which should benefit PG and the group,” noted Kevin Grundy, equity analyst at Jefferies.

“At 22x P/E, PG (and our “core” HPC / beverages basket) are near relative lows vs. the S&P 500 last seen during the 08-09 downturn, leaving risk-rewards skewed to the upside. PG’s strong quarter should drive shares higher and offers a positive read-through for the group as Procter kicks off earnings season.”

However, Procter & Gamble shares traded 1.2% lower at $132.0 on Wednesday; the stock rose over 11% in 2020.

Procter & Gamble Stock Price Forecast

Twelve analysts who offered stock ratings for Procter & Gamble in the last three months forecast the average price in 12 months at $157.00 with a high forecast of $169.00 and a low forecast of $130.00.

The average price target represents an 18.82% increase from the last price of $132.14. From those 12 analysts, eight rated “Buy”, four rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $165 with a high of $184 under a bull scenario and $103 under the worst-case scenario. The firm currently has an “Overweight” rating on the consumer goods corporation’s stock.

Several other analysts have also recently commented on the stock. JP Morgan lowered the target price to $159 from $163. Jefferies decreased the price objective to $168 from $169. Smith Barney Citigroup boosted their price objective to $165 from $159.

In addition, Truist boosted their price objective to $150 from $125. Wells Fargo & Company set an “overweight” rating and a $160.00 price objective for the company.

Equity Analyst’s View

“We expect a positive reaction to a strong FQ2 with a 2.5% top-line and 10.8% operating profit beat vs consensus, driven by strong 8% organic sales growth and an 80-bps gross margin beat vs consensus. Importantly, each segment organic sales growth was 5% or above, giving us greater confidence that PG momentum can continue going forward, as results were not narrowly driven by any one segment benefitting from COVID-19 demand. PG essentially flowed through almost all of Q2 EPS upside vs consensus to FY21 EPS guidance, which moved up by 250 bps at its midpoint, but we still view as overly conservative,” said Dara Mohsenian, equity analyst at Morgan Stanley.

“We believe strategy tweaks can sustain PG long-term top-line growth in the 4% range. In the US, a strong breadth of performance and share gains give us confidence that market share momentum is sustainable and supports long-term top-line growth above HPC peers. We see continued GM expansion with moderate commodity headwinds and a solid competitive environment. PG trades at 23x CY22e EPS, a discount to HPC peers CLX, CL and CHD, and looks compelling given our call for higher long-term PG growth.”

Check out FX Empire’s earnings calendar

Netflix Rockets After New Subscribers Fuel Blockbuster Q4 Sales

Netflix, Inc. (NFLX) shares surged over 12% in extended-hours trade Tuesday after the streaming content provider reported better than expected fourth-quarter sales on the back of robust subscriber growth. The company also said it is considering returning free cash flow to shareholders through buybacks.

Revenues for the fourth quarter (Q4) came in at $6.64 billion, slightly above the $6.63 billion consensus mark analysts had forecast. Moreover, the top line grew 20% from a year earlier, thanks to a boost of 8.5 million paid subscribers during the period. The company disclosed quarterly earnings per share (EPS) of $1.19, with the figure falling shy of Wall Street estimates of $1.30 a share and contracting 8% on a year-over-year (YoY) basis.

As of Jan. 20, 2021, Netflix stock has a market value of $221.68 billion and trades 7.21% lower on the year. However, the shares have gained nearly 50% over the past 12 months as investors piled into names that benefited from consumers spending more time at home during the pandemic.

Returning Free Cash Flow to Investors

CFO Spencer Neumann raised the prospect of returning excess free cash flow to investors while remaining on the lookout for strategic investments. “We put a premium on balance sheet flexibility, so we’re going to continue to invest aggressively into the growth opportunities that we see, and that’s always going to come first,” he said, per CNBC. “But beyond that, if we have excess cash, we’ll return it to shareholders through a share buyback program,” Neumann added. He also told investors that the company would no longer need to raise external financing for its daily operations.

Wall Street View

Citi’s Jason Bazinet maintained his ‘Neutral’ rating on Netflix shares earlier this month but raised his price target to $580 from $450. The analyst cautioned price hikes might limit new subscribers in coming quarters, resulting in a loss of market share to Disney’s streaming service, Disney+.

Elsewhere, the Street sentiment remains mostly bullish. The shares receive 21 ‘Buy’ ratings, 4 ‘Overweight’ ratings, and 12 ‘Hold’ ratings. Just one sell-side firm currently recommends selling the shares. Price targets range from as high as $700 to as low as $235, with the median pegged at $580.60. Watch for a flurry of additional upgrades over the next few weeks after yesterday’s upbeat quarterly update.

Technical Outlook and Trading Tactics

Since climbing to a new all-time high in mid-July, Netflix shares have remained stuck in a 110-point trading range. Premarket data indicates the stock will open around $565 today, placing the price toward the range’s upper trendline.

Those looking to play a breakout should plan entries above key resistance at $575 while managing risk with a stop-loss order placed around $20 below the execution price. Consider using a measured move to set a profit target. For example, add the trading range distance, as measured in points, to the breakout level. ($105 + $575 = $680 profit target)

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

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Needs Follow-Through Rally to Confirm Uptrend

March E-mini NASDAQ-100 Index futures closed higher on Tuesday as U.S. Treasury Secretary Janet Yellen advocated for a hefty fiscal relief package before lawmakers to help the world’s largest economy ride out a pandemic-driven slump.

On Tuesday, March E-mini NASDAQ-100 Index futures settled at 12985.50, up 183.25 or +1.41%.

In other news, Netflix shares rose more than 11% following the closing bell on Tuesday after the streaming television provider reported paid subscriber additions for the fourth quarter topped Wall Street expectations.

Daily March E-mini NASDAQ-100 Index

 

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned back up when buyers took out the previous main top at 13028.75 late in the session. The new main bottom is 12727.00. A trade through this level will change the trend to down.

The minor range is 12491.25 to 13125.00. Its 50% level at 12808.00 is new support.

The short-term range is 12217.00 to 13125.00. Its 50% level at 12671.00 is additional support.

The main range is 10936.25 to 13125.00. Its retracement zone at 12030.50 to 11772.25 is the major support area controlling the near-term direction of the index.

Short-Term Outlook

With two changes in trend in as many sessions, conditions are very choppy, but this is the daily chart, so you have to expect two sided price action before the next major move. Professionals have to shake the trees a little to rattle the weaker traders.

Now that the trend has turned back up, the follow-through move becomes the key as to whether the change in trend was fueled by buy stops or aggressive new buyers.

The longer the index spends under the record high at 13125.00 set on January 8, the more the chart pattern will look distributive, which tends to indicate lower prices are coming.

The real key to the next move is whether the next catalyst encourages investors to chase the market higher and buy strength, or pushes them to look for value at much lower levels. It comes down to determining how much bang for the buck can they get buying a new contract higher versus buying a near-term correction into support.

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

US Stock Market Overview – Stock Rally Led by Energy and Technology

U.S. stocks moved higher on Tuesday, led by gains in the Nasdaq. Growth and value were both strong. Most S&P 500 index sectors were higher, led by gains in energy and technology, real-estate bucked the trend. Janet Yellen was on the hill testifying for her confirmation hearing in front of the senate. She said she would focus on the American worker if confirmed. U.S. Yields moved lower along with the dollar as crude oil prices moved higher. Netflix reported after the closing bell, beating expectations on the top and bottom line. The stock immediately popped more than 5%. The company said in a statement that they no longer will need to raise capital by external financing. Money will now go to stock buybacks. Goldman Sachs reported financial results before the opening bell. Gains in trading and investment banking drove the better than expected top and bottom line.

Yellen Hearing to Be Treasury Secretary was Held on Tuesday

Janet Yellen told lawmakers she would make the needs of America’s workers her core focus if confirmed as the next U.S. Treasury secretary. The former Chair of the Federal Reserve said that she would ensure the U.S. has a competitive economy that offers good jobs and wages workers in cities and rural areas.

Goldman Reported Better than Expected Results

Goldman Sach reported a profit of $4.51 billion in the Q4 or $12.08 per share, which was more than double Goldman’s profit from the same quarter a year ago. Both quarterly net income and quarterly revenue of $11.74 billion were much better than the expectations of of $7.39 a share on revenue of $9.99 billion.

Halliburton Beats Q4 Earnings Estimates; Target Price $25 in Best Case

Halliburton, one of the world’s largest providers of products and services to the energy industry, reported better-than-expected earnings in the fourth quarter, largely driven by cost-cutting and recovery in business demand.

Halliburton reported a net loss of $235 million, or $0.27 per diluted share, for the fourth quarter of 2020. This compares to a net loss for the third quarter of 2020 of $17 million, or $0.02 per diluted share.

Adjusted net income for the fourth quarter of 2020, excluding impairments and other charges, was $160 million, or $0.18 per diluted share. That was higher than the market expectations of 15 cents per share.

The second-biggest services provider’s total revenue rose 9% to was $3.2 billion, up from revenue of $3.0 billion in the third quarter of 2020. Reported operating loss was $96 million in the fourth quarter of 2020 compared to reported operating income of $142 million in the third quarter of 2020.

“We view the strong results (Q4/20 EBITDA 8% better than consensus) as positive, with Halliburton (HAL) demonstrating that increasing activity should flow to the bottom line after completing its $1bn cost-out program in Q3/20,” said Waqar Syed, equity analyst at ATB Capital Markets.

“We think the key driver for HAL’s stock today will be guidance in the earnings call, if provided, but still think the results, high-level commentary, and supportive macro/commodity price environment should help the stock.”

At the time of writing, Halliburton shares traded nearly flat at $20.74 on Tuesday; however, the stock fell over 20% in 2020.

Halliburton Stock Price Forecast

Thirteen analysts who offered stock ratings for Halliburton in the last three months forecast the average price in 12 months at $18.84 with a high forecast of $25.00 and a low forecast of $12.00.

The average price target represents a -9.20% decrease from the last price of $20.75. From those 13 analysts, five rated “Buy”, six rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $20 with a high of $25 under a bull scenario and $8 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the energy company’s stock.

Several other analysts have also recently commented on the stock. Cowen and company raised the target price to $28 from $24. Credit Suisse upped the price objective to $14 from $12.

In addition, Barclays increased the target price to $21 from $14. Stifel raised the target price to $26 from $18. Citigroup upped to buy from neutral; raises price target to $24 from $13.5.

Analyst Comments

“Relative positioning less favourable vs. some global peers: Though it has decreased in absolute size, Halliburton (HAL) still remains more NAm-focused vs. peers, where we see a higher relative risk of downward upstream capex revisions. Cost savings likely at their limit: HAL is winding down a major cost-cutting program, which suggests to us its ability to further cut overhead and significantly surprise on margins is relatively limited,” said Connor Lynagh, equity analyst at Morgan Stanley.

“Risk-reward relatively balanced: We see relatively balanced risk-reward for HAL’s shares and believe a more significant capex shift back into its core markets would be required for meaningful outperformance vs. the group.”

Check out FX Empire’s earnings calendar

Dollar’s Weakness is Back

Gold creates a double bottom formation with two hammers on a daily chart.

Nasdaq and DAX bounce from the upper line of a correction pattern.

Dollar index cancels the Inverse Head and Shoulders and drops lower.

EURUSD starts bullish correction.

AUDJPY is heading higher after testing the neckline of a giant iH&S pattern.

USDCHF bounces from the neckline and drops lower with a proper sell signal.

CADCHF goes lower after the false bullish breakout from the symmetric triangle.

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

Logitech International’s Q3 Profit Jumps Over 190% to $2.45; Sales Grow 85%

Logitech International S.A., a Swiss-American manufacturer of computer peripherals and software, reported better-than-expected earnings in the fiscal third quarter with operating income surging 192% to $2.45 per share and sales rising 85% to $1.67 billion.

The company which manufactures mobile speakers, keyboards, mice and video conferencing devices said its Q3 GAAP operating income grew 248% to $448 million, compared to $129 million in the same quarter a year ago. Q3 GAAP earnings per share (EPS) grew 222% to $2.22, compared to $0.69 in the same quarter a year ago.

Moreover, Q3 non-GAAP operating income grew 214% to $476 million, compared to $152 million in the same quarter a year ago. Q3 non-GAAP EPS grew 192% to $2.45, compared to $0.84 in the same quarter a year ago. That was higher than the market consensus estimates of $1.08 per share.

For the fiscal year 2021, Logitech upgraded its sales growth forecasts to between 57%-60%, up from the previous outlook of between 35%-40%. The technology company raised their non-GAAP operating income to approximately $1.05 billion, up from $700 million to $725 million range.

Logitech International shares closed 2.79% lower at $100.91 on Friday; however, the stock more than doubled in 2020.

Executive Comments

“This quarter’s record results demonstrate the strength of our portfolio, addressing long-term growth trends in remote work and education, video collaboration, esports, and digital content creation,” said Bracken Darrell, Logitech president and chief executive officer.

“We are increasingly investing in our capabilities and people for the growth potential we see in the future. Logitech has never been more relevant to our customers’ work, play and creativity.”

Logitech International Stock Price Forecast

Twelve analysts who offered stock ratings for Logitech in the last three months forecast the average price in 12 months at $102.46 with a high forecast of $116.00 and a low forecast of $63.97.

The average price target represents a 1.54% increase from the last price of $100.91. From those 12 analysts, nine rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $113 with a high of $151 under a bull scenario and $63 under the worst-case scenario. The firm currently has an “Overweight” rating on the technology company’s stock.

Several other analysts have also recently commented on the stock. JP Morgan raised shares of Logitech International from a neutral rating to an overweight. Citigroup upped their price target to $110 from $105. Zacks Investment Research lowered to a hold rating from a strong-buy rating and set a $100 target price on the stock.

In addition, Credit Suisse Group reaffirmed an outperform rating and Wedbush upped their price target to $95 from $73.50 and gave the company a neutral rating.

Analyst Comments

“Logitech has been a COVID environment beneficiary, but it is on the cusp of a new era of growth where normalized EPS growth post-COVID will accelerate by 2 points from pre-pandemic levels as 1) enterprises permanently increase spending on tools that enable video collaboration, productivity and communication, 2) gaming and eSports soon become just as, if not more popular, than traditional sports, and 3) the attach rate of PC and tablet related peripherals multiplies off a low base driven by the structural shift towards notebooks,” said Erik Woodring, equity analyst at Morgan Stanley.

“We believe this makes Logitech a long-term secular beneficiary, which argues for a premium valuation not currently reflected in Logitech’s current share price.”

Check out FX Empire’s earnings calendar

US Stocks Recap (15th Jan): Stocks Decline, More May be Coming

We’ve reached a very critical juncture in the markets. Last week, I mentioned how this reminded me of the Q4 2018 pullback ( read my story here ), and still maintain that there is way too much complacency in this market. Stock markets are risky for a reason, something many Robinhood traders are sure to find out this year.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth. Hopefully, you’ll find the below enlightening from my perspective, and I welcome your thoughts and questions.

Stocks closed the week with their first weekly declines in nearly a month.

The pullbacks weren’t anything astronomical, but it could potentially be the start of the Q1 declines that I have been predicting.

For one, valuations are insane, and the tech IPO market is looking like clown school. The S&P 500 is trading near its highest forward P/E ratio since 2000, while the Russell 2000 has never traded this high above its 200-day moving average.

Signs are starting to point towards the return of inflation by mid-year as well. As the 10-year yield ticked up to its highest level since March, economist Mohammed El-Erian said “if we were to see another 20 basis point move in yields, that would be bad news.”

Expectations haven’t been this high for inflation in years either. According to Edward Jones , the 10-year breakeven rate hit its highest level since 2018 last week due to rising commodity prices, a weaker dollar, and broad stimulus policy. The 10-year breakeven rate is a market-based measure of inflation expectations.

What’s also concerning is that investors didn’t seem to bat an eye at Joe Biden’s $1.9 trillion stimulus package !

What does this tell me?

That maybe this was anticipated and priced in already. According to Jim Cramer on his Mad Money show on CNBC, “When an event occurs and the market gets exactly what it wants, but nothing more, it’s treated as a reason to sell, not to buy.”

Although this week’s decline was moderate, I still feel that a correction between now and the end of Q1 2020 is likely amidst a tug of war between good news and bad news.

Generally, corrections are healthy for markets and more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017). The last time we saw one was in March 2020, so we could be well overdue.

Corrections are healthy market behavior and could be an excellent buying opportunity for what should be a great second half of the year.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market will happen.

I hope everyone has a great day. Best of luck, and happy trading!

Time to Wager – Is the Dow Over/Under 31,000 Before the End of January?

Figure 1- Dow Jones Industrial Average $INDU

Is it possible to choose “push” on this gamble?

I have too many short-term questions and concerns about the Dow Jones to unequivocally say it’s overheated like the Russell or tech IPOs, or if it’s at the right buying level.

Although the Dow’s RSI is comparable to the Nasdaq’s on the surface, it has also not exceeded overbought levels as much.

I do like the Dow’s decline this week. But I’d like to see a more profound dip before buying back in.

If someone wanted to make an over/under bet with me on the Dow’s 31,000 level by the end of January, the truth is I’d probably choose “push.” You’d have better luck betting on the AFC Championship game this year (but only if Mahomes plays).

I don’t like how COVID-19 is trending (who does?), I am disappointed in the vaccine roll-out (although it’s improving), and I am concerned about short-term economic and political headwinds. But I think it’s more likely than not that the Dow hovers around 31,000 by month’s end rather than make any significant move upwards or downwards. It is very hard right now to make a conviction call on this index.

If and when there is a drop in the index, it probably won’t be anything like we saw back in March 2020.

While a 35,000 call to close out 2021 is a bit aggressive, the second half of 2021 could show robust gains for the index once vaccines are available to the general public.

With so much uncertainty, the call on the Dow stays a HOLD. I am closely monitoring the RSI if it exceeds 70.

For an ETF that looks to directly correlate with the Dow’s performance, the SPDR Dow Jones ETF (DIA) is a strong option.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

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

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’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. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Goldman Sachs’ Profit to Jump 56% to $7.33 in Fourth Quarter

New York-based leading global investment bank Goldman Sachs’ profit is expected to grow nearly 56% to $7.33 in the quarter ended December 2020 from the same quarter last year; however, revenue could decline 4.9% to $9.47 billion in the same period.

It is worth noting that in in the last two years, the world’s leading investment manager has surpassed market consensus expectations for profit and revenue most of the times. The better-than-expected number would help the stock to rally. The company will report its earnings result on Tuesday, January 19.

“Shares of Goldman have underperformed the industry in the past three months. Earnings estimate have been revised upward prior to the fourth-quarter earnings release. The company has a decent earnings surprise history, outpacing the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. Goldman’s solid position in worldwide announced and completed M&As will keep strengthening the business,” noted analysts at ZACKS Research.

“Also, business diversification helps Goldman sustain growth. The company’s cost management efforts continue to support bottom-line growth. Moreover, with strong liquidity, Goldman carries a low credit risk in case of any economic downturn. Though, legal issues, high dependence on overseas revenues and volatile client-activity might impede top-line growth, steady capital deployment activities keep us encouraged.”

Goldman Sachs shares closed 2.23% lower at $301.01 on Friday; however, the stock rose about 15% in 2020.

Goldman Sachs Stock Price Forecast

Eleven analysts who offered stock ratings for Goldman Sachs in the last three months forecast the average price in 12 months at $312.00 with a high forecast of $407.00 and a low forecast of $225.00.

The average price target represents a 3.65% increase from the last price of $301.01. From those 11 analysts, eight rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $291 with a high of $347 under a bull scenario and $160 under the worst-case scenario. The firm currently has an “Underweight” rating on the financial services company’s stock.

Several other analysts have also recently commented on the stock. BofA global research raised the stock price forecast to $345 from $270. BMO upped the target price to $306 from $289. Citigroup increased the price objective to $357 from $325. Piper Sandler raised the target price to $325 from $270. Barclays increased the price objective to $362 from $270.

Analyst Comments

“As market volatility and the urgency around capital raising activity (both equity and debt) subside in 2021, we expect total revenues decline 11% y/y from a strong 2020. We are valuing the group on normalized 2023 EPS. While we still see 15%+ upside to Goldman Sachs based on this methodology, we see even more upside elsewhere in the group, particularly in consumer finance stocks which have been under more pressure. This drives our Underweight rating,” said Betsy Graseck, equity analyst at Morgan Stanley.

“Over time, we expect Goldman Sachs can drive some multiple expansion as management executes on its multi-year strategic shift towards higher recurring revenues.”

Check out FX Empire’s earnings calendar

Morgan Stanley Sees Over 37% Rally in Delta Airlines; Forecasts Stock at $86 in Bull Case

Morgan Stanley raised their stock price forecast on Delta Airlines, one of the major players in the United States aviation industry, to $55 from $51 and said a decent Q1 guide and bullish commentary on the call about the potential for a traffic rebound, particularly in corporate, reinforces their bullish view on the airline space.

On Thursday, Delta Airlines reported a loss for the fourth consecutive time in the December quarter and a full-year 2020 loss for the first time in 11 years as COVID-19 travel restrictions significantly dented air travel demand but CEO Ed Bastian said he expects 2021 to be the year of recovery.

The Airline company which provides scheduled air transportation for passengers and cargo reported a quarterly adjusted loss of $2.53​​ per share, worse than the Wall Street consensus estimate of $2.47​​ per share loss.

“Despite coming into the new year on the back of tough 4Q traffic numbers amidst a third pandemic wave and the prospect of 1Q somewhat bereft of catalysts, we are very encouraged by mgmt’s confident tone on the conference call with a clear line of sight to the other side of the pandemic. We think this should result in a tide that will continue to rise and lift the airline stocks with it,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We believe Delta Airlines’ (DAL) strong customer loyalty/franchise, corporate relationships, footprint, historical PRASM/margin strength, balance sheet and mgmt. team leave them well-positioned amongst legacy peers to participate in the rebound, with the potential for an upside surprise if international/corporate volumes/PRASM can surprise to the upside in 2H21/1H22. Long-only investors returning to the sector as traffic comes back are also likely to flock to DAL, in our view, which makes the technical setup attractive as well. Our 2021/2022/2023 EPS moves to -$1.42/4.33/7.52 vs. $0.91/4.80/NA prior,”

Other equity analysts also recently updated their stock outlook. Credit Suisse raised the target price to $48 from $47. Stifel upped the stock price forecast to $49 from $39. JP Morgan lowered the price objective to $49 from $51.

In addition, Deutsche Bank lowered shares of Delta Air Lines from a “buy” rating to a “hold” rating and set a $47 target price in December. BNP Paribas began coverage and issued an “outperform” rating and a $54 price target.

Fourteen analysts who offered stock ratings for Delta Airlines in the last three months forecast the average price in 12 months at $48.83 with a high forecast of $58.00 and a low forecast of $40.00.

The average price target represents a 22.14% increase from the last price of $39.98. From those 14 equity analysts, six rated “Buy”, seven rated “Hold” and one rated “Sell”, according to Tipranks.

Delta Airlines’ shares closed 3.59% lower at $39.98 on Friday; the stock fell over 30% in 2020. Morgan Stanley’s stock price forecast suggests a potential upside of 37.57% from the stock’s current price.

Morgan Stanley also gave a target price of $86 under a bull-case scenario and $29 under the worst-case scenario. The firm currently has an “Overweight” rating on the Airline company’s stock.

“Why Overweight? Delta Airlines (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. With ample liquidity we see limited liquidity risk here,” Morgan Stanley’s Shanker added.

“Additionally, we continue to see DAL’s international alliances and partnerships as strategic assets, despite recent writedowns.”

Check out FX Empire’s earnings calendar

Netflix Under Pressure Ahead of Tuesday Report

Netflix Inc. (NFLX) reports Q4 2020 earnings after Tuesday’s closing bell, with analysts looking for a profit of $1.41 per-share on $6.62 billion in revenue. If met, earnings-per-share (EPS) will mark a modest 8.4% profit increase, compared to the same quarter in 2020. Of course, all hell broke loose after that report, with a worldwide pandemic boosting subscriptions, especially in more resistant older demographics.

Netflix Growth Concerns

The stock posted an impressive 67% return in 2020 but hasn’t added a penny in the last six months and has lost 8% so far in 2021.  Rivals Walt Disney Co. (DIS) and Roku Inc. (ROKU) have ascended the leader board between then and now, with their rapidly-growing services attracting waves of Wall Street upgrades. On the flip side, growth concerns have plagued Netflix since July, with some analysts expecting 2021 to reveal all sorts of structural weaknesses.

That sentiment is far from universal, as evidenced by BMO Capital Market’s call to sell Disney. Analyst Daniel Salmon downgraded the stock to ‘Outperform’ in December, stating that Netflix “retakes the Top Pick mantle”. However, Needham’s Laura Martin is telling clients to sell NFLX and buy ROKU in a pairs trade that highlights a popular opposing view. She also expects DIS to have more subscribers within 18 to 24 months, given the service’s incredible ingrowth trajectory.

Wall Street and Technical Outlook

Wall Street consensus remains at a ‘Moderate Buy’ ahead of Tuesday’s confessional, based upon 19 ‘Buy’ and 7 ‘Hold’ recommendations. However, three analysts now recommend that subscribers close positions and move to the sidelines. Price targets currently range from a low of $235 to a Street-high $700 while the stock ended last week about $85 below the median $583 target. This humble placement raises the potential for a ‘buy-the-news’ reaction.

Netflix entered a broad rectangle pattern after posting the all-time high last summer and has now reversed at range resistance three times. However, it’s also held four tests at range support near 465, establishing a standoff that will end with one side getting trapped by an adverse trend. Monthly and weekly relative strength indicators are now entrenched in sell cycles, raising odds that committed sellers eventually take control of the tape.

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.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – 12671.00 Potential Trigger Point for Steep Break

March E-mini NASDAQ-100 Index futures finished lower on Friday as the technology-based index fell in sympathy with the benchmark S&P 500 Index and the blue chip Dow Jones Industrial Average, which were pressured by weakness in the banking and energy sectors.

If there was common ground with the other majors, it was weaker than expected U.S. economic data and worries about the cost of the Biden stimulus package. Also weighing on prices may have been simmering tensions between the United States and China.

On Friday, March E-mini NASDAQ-100 Index futures settled at 12802.25, down 98.75 or -0.77%.

Perhaps generating some early pressure on Friday was weakness in technology stocks in Asia. Shares of Chinese smartphone maker Xiaomi plunged on Friday trade after U.S. President Donald Trump’s administration placed the firm on a blacklist of alleged Chinese military companies. By Friday’s close in Hong Kong, shares of Xiaomi listed in the city dived 10.26%.

In other news, investors may have trimmed some of their long positions as they assessed the impact of President-elect Joe Biden’s coronavirus relief plan on the economy and the potential for higher taxes. In economic news, U.S. consumer confidence fell and retail sales dipped 0.7% in December, raising concerns over a slowing economy.

Daily March E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend turned down on Friday when sellers took out the previous main bottom at 12767.25. A trade through 13028.75 will change the main trend to up, while a move through 13125.00 will reaffirm the uptrend. On the downside, potential targets are a pair of main bottoms at 12491.25 and 12461.00.

The minor range is 12491.25 to 13125.00. The index straddled its 50% level at 12808.25 late in the session on Friday.

The short-term range is 12217.00 to 13125.00. Its 50% level at 12767.25 is potential support.

The main range is 10936.25 to 13125.00. Its retracement zone at 12030.50 to 11772.25 is potential support and a value zone. It is also controlling the near-term direction of the index.

Short-Term Outlook

We’re going to be looking at two levels when cash market trading resumes on Tuesday, following Monday’s U.S. bank holiday.

Bullish Scenario

A sustained move over 12808.25 will indicate the presence of buyers. If this move creates enough upside momentum then look for the rally to possibly extend into the first main top at 13028.75. Taking out this level could lead to a test of the record high at 13125.00.

Bearish Scenario

A sustained move under 12671.00 will signal the presence of sellers. This could trigger a quick break into 12491.25, followed by 12461.00. The daily chart starts to open up to the downside under this level with 12217.00 the next potential downside target. This main bottom is the last potential support before the 12030.50 to 11772.25 main bottom.

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

Earnings to Watch Next Week: Logitech, Goldman Sachs, NetFlix and IBM in Focus

Next week’s earnings are of much significance for major market movements as 2021 is believed to be a year of recovery on hopes of successful roll-out of the COVID-19 vaccine.

Earnings Calendar For The Week Of January 18

Monday (January 18)

IN THE SPOTLIGHT: LOGITECH INTERNATIONAL

Logitech International S.A., a Swiss-American manufacturer of computer peripherals and software, is expected to report a profit of $1.08 in the fiscal third quarter, which represents year-over-year growth of about 29% from the same quarter last year when the company reported 84 cents per share.

The Lausanne-based company’s revenue to grow over 35% year-over-year to $1.23 billion from $902.69 million in the same period last year.

“We are bullish into Logitech‘s F3Q21 earnings report next week as our December quarter checks point to a better than the expected market environment, most notably for PC peripherals. We’d be buyers into the print and raise our PT to $113 (from $106) to account for recent peer multiple expansion,” noted Erik Woodring, equity analyst at Morgan Stanley.

Tuesday (January 19)

IN THE SPOTLIGHT: GOLDMAN SACHS, NETFLIX

GOLDMAN SACHS: New York-based leading global investment bank is expected to report a profit of $7.33 in the fourth quarter, which represents year-over-year growth of about 56% from the same quarter last year when the company reported $4.69 per share. The bank’s revenue is expected to dip 4.9% from the year-ago quarter to $9.47 billion.

“As market volatility and the urgency around capital raising activity (both equity and debt) subside in 2021, we expect total revenues decline 11% y/y from a strong 2020. We are valuing the group on normalized 2023 EPS. While we still see 15%+ upside to Goldman Sachs (GS) based on this methodology, we see even more upside elsewhere in the group, particularly in consumer finance stocks which have been under more pressure,” said Betsy Graseck, equity analyst at Morgan Stanley.

“This drives our Underweight rating. Over time, we expect GS can drive some multiple expansion as management executes on its multi-year strategic shift towards higher recurring revenues.”

NETFLIX: California-based global internet entertainment service company is expected to report a profit of $1.35 in the fourth quarter, which represents year-over-year growth of about 4% from the same quarter last year when the company reported $1.30 per share. The streaming video pioneer’s revenue is expected to surge over 20% from the year-ago quarter to $6.60 billion.

“We expect paid net adds to come in the above guide, helped by ongoing shutdowns & seasonal strength. Our view is supported by our positive proprietary 4Q20 survey data, which implies rising pricing power into year-end. We tweaked estimate’s & introduced ’21 quarters; in turn, our DCF-based price target rises to $650 from $625 prior; reiterate ‘Outperform’ rating,” said John Blackledge, equity analyst at Cowen and company.

NetFlix (NFLX) shares were +67% in ’20 alongside a pandemic surge, following massive sub beats in 1Q / 2Q respectively and 28.1MM total paid net adds in 1Q-3Q ’20, up 47% y/y. With consumers staying home amid colder weather & limited social activities, we expect Netflix engagement to remain high; meanwhile, to the extent, there is any NT pressure on UCAN paid subs from the 4Q US price increase, we would consider this a buying opportunity for NFLX shares as the co. grows the value prop alongside rising ARPU.”

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

Ticker Company EPS Forecast
PACW Pacwest Bancorp $0.67
CMA Comerica $1.18
ONB Old National Bancorp $0.38
SCHW Charles Schwab $0.65
GS Goldman Sachs $7.33
STT State Street $1.57
HAL Halliburton $0.15
FULT Fulton Financial $0.27
JBHT J B Hunt Transport Services $1.30
ZION Zions Bancorporation $1.01
PNFP Pinnacle Financial Partners $1.36
FNB FNB $0.24
UCBI United Community Banks $0.60
NFLX Netflix $1.35
IBKR Interactive Brokers $0.58
RNST Renasant $0.59
SBNY Signature Bank $2.91

Wednesday (January 20)

IN THE SPOTLIGHT: UNITEDHEALTH

UNITEDHEALTH: Minnesota-based health insurance and health care data analysis giant is expected to report a profit of $2.41 in the fourth quarter, which represents a year-over-year decline of about 40% from the same quarter last year when the company reported $3.90 per share.

The largest insurance company by Net Premiums is witnessing a slowdown in its international business as increased joblessness due to the COVID-19 pandemic has dented demand for commercial membership.

UnitedHealth Group is the number one Medicare Advantage player with 28% market share, the number two Medicare PDP player with 20% market share, and the number two commercial player with 15% market share. United’s model is enhanced via vertical integration with its OptumRx PBM platform, which is one of the three largest PBMs in the country,” wrote Ricky Goldwasser, equity analyst at Morgan Stanley.

“With a large lead in the breadth of services offerings and considerable exposure to government businesses, UnitedHealth is well-positioned for any potential changes in the US healthcare system. A strong balance sheet and continued solid cash generation give flexibility for continued M&A.”

United Airlines is expected to report a deep loss in the fourth quarter due to the COIVD-19 pandemic, which harmed demand for travel.

Ohio-based Tide detergent and Pampers diaper manufacturer Procter & Gamble is expected to report an increase in profits on rising demand for home care and laundry products amid the COIVD-19 pandemic.

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

Ticker Company EPS Forecast
UNH UnitedHealth $2.41
PG Procter & Gamble $1.51
ASML Asml $2.96
MS Morgan Stanley $1.30
USB US Bancorp $0.95
BK Bank Of New York Mellon $0.88
FAST Fastenal $0.33
CFG Citizens Financial $0.91
CBSH Commerce Bancshares $0.92
BOKF BOK Financial $1.92
FCEL Fuelcell Energy -$0.07
KMI Kinder Morgan $0.24
DFS Discover Financial Services $2.36
UAL United Airlines Holdings -$6.56
AA Alcoa $0.09
WTFC Wintrust Financial $1.41
UMPQ Umpqua $0.48
HWC Hancock Whitney Corp $0.90
PLXS Plexus $1.10
STL Sterling Bancorp $0.46
PTC PTC $0.65

Thursday (January 21)

IN THE SPOTLIGHT: IBM

IBM: Armonk, New York-based technology and consulting company is expected to report a profit of $1.81 in the fourth quarter, which represents a year-over-year decline of over 60% from the same quarter last year when the company reported $4.71 per share.

“For 2020, IBM refrained from providing any guidance, citing business uncertainty. Nevertheless, management stated that the fourth quarter is a seasonally strong quarter. The company is witnessing robust pipelines across hybrid cloud and data platform, AI solutions, in Cognitive Apps business driven by strength in Cloud Paks and Security, cloud-based transformation services in GBS segment, and App modernization offerings,” noted analysts at ZACKS Research.

“Also, management is banking on advancement in Red Hat “actual backlog growth.” Moreover, gains from the rapid uptake of IBM z15 is anticipated to be a tailwind. The company also anticipates to end 2020 with reduced debt levels.”

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

Ticker Company EPS Forecast
UNP Union Pacific $2.24
TFC Truist Financial Corp $0.85
TAL TAL International $0.04
TRV Travelers Companies $3.16
BKR Baker Hughes Co $0.17
FITB Fifth Third Bancorp $0.68
NTRS Northern $1.49
MTB M&T Bank $3.02
KEY KEY $0.43
CTXS Citrix Systems $1.34
HOMB Home Bancshares $0.39
INDB Independent Bank $1.02
FBC Flagstar Bancorp $2.36
WBS Webster Financial $0.75
BKU BankUnited $0.71
WNS Wns Holdings $0.59
INTC Intel $1.10
IBM IBM $1.81
ISRG Intuitive Surgical $3.09
CSX CSX $1.01
PPG PPG Industries $1.58
SIVB SVB Financial $3.79
TCBI Texas Capital Bancshares $1.13
ASB Associated Banc $0.30
PBCT People’s United Financial $0.32
OZK Bank Ozk $0.78
WAL Western Alliance Bancorporation $1.33
BKRKY Bank Rakyat $0.17
MTCH Match Group $0.50
MTG MGIC Investment $0.37
STX Seagate Technology $1.13

Friday (January 22)

Ticker Company EPS Forecast
EDU New Oriental Education Tech $0.26
ABBV AbbVie $2.86
HON Honeywell International $2.00
SLB Schlumberger $0.17
KSU Kansas City Southern $1.93
RF Regions Financial $0.42
HBAN Huntington Bancshares $0.29
ALLY Ally Financial $1.05
FHN First Horizon National $0.28
HRC Hill-Rom $1.05
NEP Nextera Energy Partners $0.39
IBN Icici $0.14
TOP Topdanmark A/S kr3.63

 

US Stocks Falter Amid Concerns Biden Stimulus Plan Would Lead to Higher Interest Rates, Corporate Taxes

Wall Street’s major stock indexes finished lower on Friday. Gains were capped as investors assessed the impact of President-elect Joe Biden’s $1.9 trillion stimulus plan with some suggesting higher corporate taxes would be necessary to pay for it. Also weighing on prices was a drop in U.S. big bank shares after their reports kicked off earnings season and a sharp break in energy due to the announcement of a regulatory probe into Exxon Mobil Corp.

In the cash market on Friday, the benchmark S&P 500 Index settled at 3768.25, down 27.29 or -0.81%. The blue chip Dow Jones Industrial Average finished at 30814.26, down 177.26 or -0.65% and the tech-based NASDAQ Composite closed at 12998.50, down 114.14 or -1.02%.

Biden’s Stimulus Plan Caps Gains, Raises Concerns about Taxes

Biden’s proposal, called the American Rescue Plan, includes increasing the additional federal unemployment payments to $400 per week and extending them through September, direct payments to many Americans of $1,400, and extending the federal moratoriums on evictions and foreclosures through September.

Biden’s coronavirus relief stimulus package may prove a double-edged sword for investors, sustaining optimism for further economic revival while raising worries over how the United States will pay for it all.

Investors didn’t chase the market higher on Friday after Biden announced the package the evening before because it had been widely anticipated by Wall Street and has helped lift the broad S&P 500 Index nearly 3% in the week since Democratic challengers won both of Georgia’s U.S. Senate seats, giving Democrats full control of Congress.

However, that rally has been mirrored by a slide in Treasuries, due in part to expectations that the government will need to fund the spending with more debt issuance and nudging borrowing costs throughout the economy higher.

On the other side, there’s a chance that markets will have to pay for this in the form or sharply higher interest rates or tax hikes that could cap equity valuations.

Bank Stocks Drag S&P Lower

The S&P 500 Banks Index Lost Ground as shares of Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc tumbled even though they had posted better-than-expected fourth-quarter profits. The bank sector had rallied sharply in recent days.

JPMorgan Chase on Friday beat analysts’ estimates for fourth-quarter profit on record trading results and a boost from releasing money previously set aside for loan losses.

Wells Fargo released mixed results for the fourth quarter, sending the bank’s stock lower. Earnings per share of 64 cents exceeded Refinitiv’s estimate of 60 cents, but revenue of $17.93 billion fell short of the $18.127 billion forecast

Citigroup posted fourth-quarter results that beat analysts’ estimates for profit as the firm joined rival JPMorgan Chase in releasing reserves for loan losses.

Wells Fargo, down 7.8%, was among the biggest drags on the S&P 500.

Exxon Reportedly Investigated by SEC

Shares of Exxon slipped more than 5% on Friday after The Wall Street Journal reported that the Securities and Exchange Commission opened an investigation that the Securities and Exchange Commission opened an investigation into the oil giant over how it valued a key asset in the oil-rich Permian Basin.

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

The Week Ahead – U.S Politics, Monetary Policy, Economic Data, and COVID-19 in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 73 stats in focus in the week ending 22nd January. In the week prior, 46 stats had been in focus.

For the Dollar:

It’s a quiet week ahead on the economic data front.

In a shortened week, there are no material stats to consider in the 1st half of the week.

Through Thursday, Philly FED Manufacturing PMI and weekly jobless claims figures are in focus.

With market attention to labor market conditions, expect the jobless claims to have the biggest impact. Another jump in jobless claims would likely weigh on riskier assets.

At the end of the week, prelim private sector PMI figures for January wrap things up.

Housing sector data also due out in the week will likely have a muted impact on the Dollar and risk sentiment.

The Dollar Spot Index ended the week up by 0.75% to 90.772.

For the EUR:

It’s a busy week ahead on the economic data front.

On Tuesday, January ZEW Economic Sentiment figures for Germany and the Eurozone kick things off.

Germany’s ZEW Economic Sentiment indicator will likely be the key driver.

The focus will then shift to January prelim private sector PMI numbers on Friday. France, Germany, and the Eurozone’s private sectors will be in the spotlight on.

Expect Germany’s manufacturing and the Eurozone’s composite to be the key drivers.

Finalized December inflation figures for member states and the Eurozone, also due out in the week, will likely have a muted impact on the EUR.

On the monetary policy front, the ECB is in action on Thursday. No moves are expected, leaving the press conference as the key driver. Questions on the economic outlook are likely as EU member states extend lockdown periods.

The EUR ended the week down by 1.11% to $1.2082.

For the Pound:

It’s a relatively busy week ahead on the economic calendar. Key stats include December inflation and retail sales figures, CBI industrial trend orders, and prelim January private sector PMIs.

Expect the retail sales figures and services PMI, due out on Friday, to have the greatest influence.

Away from the economic calendar, COVID-19 news will also influence. Following the vaccine approvals, the markets will be looking for new COVID-19 cases to begin abating.

On the monetary policy front, BoE Governor is scheduled to speak on Wednesday.

The Pound ended the week up by 0.16% to $1.3590.

For the Loonie:

It’s a busy week ahead on the economic calendar.

Key stats include December inflation and November retail sales figures due out on Wednesday and Friday.

Other stats include housing stats, manufacturing and wholesale sales figures. We would expect these stats to have a muted impact on the Loonie, however.

On the monetary policy front, the BoC is in action on Wednesday. With the markets expecting the BoC to hold rates steady, the rate statement and press conference will be the key drivers.

From elsewhere, economic data from China and private sector PMIs from the Eurozone and the U.S will also influence.

Expect COVID-19 news updates and chatter from Capitol Hill to also provide direction.

The Loonie ended the week down by 0.24% to C$1.2732 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s a busier week on the economic data front.

Consumer sentiment figures for January are due out on Wednesday.

With consumer confidence key to fueling a pickup in consumer spending and an economic recovery, expect Aussie Dollar sensitivity to the numbers.

On Thursday, December employment figures will also provide direction ahead of retail sales figures on Friday.

Economic data from China and private sector PMI numbers from the U.S and the Eurozone will also influence.

COVID-19 news updates will remain a key driver in the week. however.

The Aussie Dollar ended the week down by 0.70% to $0.7703.

For the Kiwi Dollar:

It’s a quiet week ahead on the economic calendar.

In the 1st half of the week, 4th quarter business confidence and electronic card retail sales figures are in focus on Tuesday.

At the end of the week, Business PMI and 4th quarter inflation figures wrap things up.

Expect business confidence, retail sales, and 4th quarter inflation figures to be the key drivers.

The Kiwi Dollar ended the week down by 1.51% to $0.7133.

For the Japanese Yen:

It is a busy week ahead.

Finalized November industrial production figures get things going on Monday.

On Thursday, December trade figures will draw plenty of attention. With the COVID-19 pandemic continuing to wreak havoc, weak numbers could test market risk appetite.

At the end of the week, December inflation figures and prelim private sector PMIs for January wrap things up. The PMI numbers should have greater influence at the end of the week.

On the monetary policy front, the BoJ is in action on Thursday.

The Japanese Yen ended the week up by 0.09% to ¥103.85 against the U.S Dollar.

Out of China

It’s also a busy week ahead.

December industrial production and 4th quarter GDP numbers are due out on Monday. These will be the key stats of the week.

Other stats include fixed asset investment, retail sales, and unemployment figures. Barring dire numbers, however, these stats should have limited impact on market risk sentiment.

On Wednesday, the PBoC is also in action. However, the markets are not expecting any moves.

The Chinese Yuan ended the week down by 0.10% to CNY6.4809 against the U.S Dollar.

Geo-Politics

U.S Politics

It’s a busy week on Capitol Hill.

Inauguration Day and Trump’s impeachment will draw interest.

COVID-19

Vaccination rates and availability of vaccines will be key areas of interest.

An upward trend in vaccination rates and a downward trend on infection rates would support optimism towards an economic recovery.

Corporate Earnings

A number of big names deliver results in the week ahead.

From the U.S

These include:

Bank of America (Tues)

Goldman Sachs Group (Tues),

Netflix (Tues)

United Airlines (Wed)

Morgan Stanley (Wed)

Intel Corp. (Thurs).

The Weekly Wrap – COVID-19, Economic Data, and U.S Stimulus Weigh on Riskier Assets

The Stats

It was a relatively busy week on the economic calendar, in the week ending 15th January.

A total of 46 stats were monitored, following 61 stats from the week prior.

Of the 46 stats, 21 came in ahead forecasts, with 17 economic indicators coming up short of forecasts. There were 8 stats that were in line with forecasts in the week.

Looking at the numbers, 17 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 23 reflected a deterioration from previous.

For the Greenback, it was a 2nd consecutive weekly gain, with the Dollar Spot Index rising by 0.75% to $90.772. In the previous week, the Dollar had risen 0.18% to 90.098.

Out of the U.S

It was a relatively busy week on the economic data front.

It was a quiet 1st half of the week, however, with stats limited to JOLTs job openings and inflation figures.

While job openings fell in November, inflation held steady, with the annual rate of core inflation holding at 1.6%.

Consumer prices rose by 0.4%, month-on-month, while core consumer prices increased by a modest 0.1%.

In a busy 2nd half of the week, key stats included the weekly jobless claims, retail sales, and consumer sentiment figures.

Jobless claims figure disappointed on Thursday, with initial jobless claims jumping from 784k to 965k.

In December, core retail sales slid by 1.4%, with retail sales falling by 0.7%, both following on from declines in November.

Consumer sentiment figures also disappointed.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 80.7 to 79.2.

The downside was limited, however, supported by COVID-19 vaccines and hopes of a bipartisan shift.

The survey noted that the fall was minor when considering the sharp rise in COVID-19 related deaths, insurrection, and Trump’s impeachment.

Other stats included industrial production, NY Empire State Manufacturing, and business inventory figures. These stats had limited impact on the markets, however.

On the monetary policy front, FED Chair Powell assured the markets that rates were not going up any time soon. The FED Chair also stated that there would be no tapering of bond purchases near-term.

In the equity markets, the NASDAQ and the S&P500 slid by 1.54% and by 1.48% respectively. The Dow fell by a more modest 0.91%.

Out of the UK

It was a relatively busy week on the economic data front.

Monday through Thursday economic data was limited to BRC retail sales and RICS house price figures.

Retail sales rose by a further 4.8% in December, following a 7.7% rise in November according to the BRC.

House prices were also on an upward trend, with the RICS house price balance coming in at 65%. While down marginally from October’s 66%, upward pressure on house prices is expected to remain.

At the end of the week, industrial and manufacturing production and GDP figures were in focus.

In November, industrial production fell by 0.1%, following a 1.1% rise in October. Manufacturing production rose by 0.7%, following a 1.6% increase in October. Both fell short of forecasts.

GDP figures were not much better. In November, the economy contracted by 2.6% reversing 0.4% growth from October. On a 3-month rolling basis, the economy grew by 4.1%, slowing from a 10.2% to October.

Trade data released on Friday had a muted impact on the Pound, however. In November, the trade deficit widened from £13.29bn to £16.01bn, with the non-EU deficit widening from £5.82bn to £8.01bn.

Away from the economic calendar, a pickup in vaccination rates in the UK offset the negative sentiment towards lockdown measures.

In the week, the Pound rose by 0.16% to $1.3590. In the week prior, the Pound had fallen by 0.76% to $1.3568. A 0.72% slide on Friday pared some of the gains from earlier in the week.

The FTSE100 ended the week down by 2.00%, partially reversing a 6.39% gain from the previous week.

Out of the Eurozone

It was a relatively quiet week on the economic data front.

Industrial production and trade figures for the Eurozone, together with full year GDP numbers for Germany were in focus.

It was a mixed set of numbers for the EUR and the European majors.

For the Eurozone, industrial production jumped by 2.5% in November, following a 2.3% increase in October.

Trade data disappointed, however, with the trade surplus narrowing from €30.0bn to €25.8bn in November. Weak numbers were expected, however, following Germany’s trade data from last week.

While economic data from Germany has been impressive of late, GDP figures disappointed.

For the full year 2020, the economy contracted by 5.0%, following 0.6% growth in 2019. Economists had forecasted a 5.1% fall, however, which limited the damage.

ECB President Lagarde had spoken the day before the release of the GDP numbers. Lagarde continued to stand by the ECB’s economic forecasts, in spite of the extended lockdown measures in the EU. Lagarde pointed out that the forecasts had factored in lockdowns through the 1st quarter.

At the end of the week, finalized inflation figures for France and Spain had a muted impact on the EUR.

On the monetary policy front, the ECB’s monetary policy meeting minutes also failed to move the dial in the week.

For the week, the EUR slid by 1.11% to $1.2082. In the week prior, the EUR had risen by 0.02% to $1.2218.

For the European major indexes, it was a bearish week. The EuroStoxx600 fell by 0.81%, with the CAC40 and DAX30 sliding by 1.67% and 1.86% respectively.

A continued spike in new COVID-19 cases weighed. Across the EU, member states were reporting particularly low vaccination rates that added to the negative mood.

For the Loonie

It was a particularly quiet week on the economic data front. There were no material stats to provide the Loonie with direction.

At the start of the week, the BoC’s Business Outlook Survey failed to move the dial.

Market optimism, fueled by expectations of a sizeable U.S stimulus package, had supported crude oil prices and the Loonie.

A Friday sell-off, however, left the Loonie in the red. Concerns over the COVID-19 pandemic and market reaction to the Biden stimulus package weighed on riskier assets.

In the week ending 15th January, the Loonie fell by 0.24% to C$1.2732. In the week prior, the Loonie had risen by 0.2% to C$1.2702.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar, following solid gains from the previous week.

In the week ending 15th January the Aussie Dollar fell by 0.70% to $0.7703, with the Kiwi Dollar ended the week down by 1.51% to $0.7133.

For the Aussie Dollar

It was a quiet week on the economic calendar.

November retail sales, building permit, and new home loan figures were in focus in the week.

Retail sales impressed in November, supported by an easing of containment measures in Victoria. Sales jumped by 7.1%, following a 1.4% rise in October.

Building permits rose by 2.6%, following a 3.3% increase in October, with new home loans surging by 5.5%.

Home loans hit a record high mid-way through the 4th quarter.

From elsewhere, trade data from China also provided support, with imports and exports on the rise in December.

For the Kiwi Dollar

It was also a particularly quiet week on the economic calendar.

There were no material stats from New Zealand to provide the Kiwi Dollar with direction.

For the Japanese Yen

It was a relatively quiet week on the economic calendar. Core machinery orders were in focus in the week.

Month-on-month, orders rose by 1.5% in November, following October’s 17.1% surge. Economists had forecast a 6.2% slide. Year-on-year, orders were down by 11.3%, after having risen by 2.8% in October. Economists had forecast a more severe 15.4% slump.

The stats ultimately had a muted impact on the Japanese Yen, however. COVID-19 news and chatter from Capitol Hill remained key drivers in the week.

The Japanese Yen rose by 0.09% to ¥103.85 against the U.S Dollar. In the week prior, the Yen had fallen by 0.72% to ¥103.94.

Out of China

Inflation and trade data for December were in focus.

The stats were skewed to the positive, supporting riskier assets in the week.

Inflationary pressures returned at the end of the year, with consumer prices rising by 0.7%, month-on-month. In November, consumer prices had fallen by 0.6%. As a result, consumer prices were up by 0.2% year-on-year, partially reversing a 0.5% decline from November.

Wholesale deflationary pressures also eased at the end of the year.

Trade data was more impressive, however, with exports surging by 19.1% following a 21.1% jump in November. Imports increased by 6.5%, leading to a widening in the USD trade surplus from $75.4bn to $78.16bn.

While the stats were positive, a spike in new COVID-19 cases in China was a concern in the week.

In the week ending 15th January, the Chinese Yuan fell by 0.10% to CNY6.4809. In the week prior, the Yuan had risen by 0.81% to CNY6.4746.

The CSI300 slipped by 0.68%, while the Hang Seng ended the week up by 2.50%.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Trend Changed to Down When 12767.25 Failed to Hold

March E-mini NASDAQ-100 Index futures are trading lower shortly before the cash market close on Friday. The weakness is being attributed to sympathy selling in reaction to the decline in the S&P 500 Index and Dow Jones Industrial Average, which fell after President-elect Joe Biden announced details of a $1.9 trillion stimulus plan and major banks released their quarterly results, kicking off the earnings reporting season.

At 20:49 GMT, March E-mini NASDAQ-100 Index futures are at 12806.00, down 95.00 or -0.74%.

The technology-driven index is down more than 1% this week, which suggests investors had been anticipating Biden’s sizeable stimulus announcement. Therefore becoming a buy the rumor, sell the fact event. Furthermore, it’s going to take weeks to get anything passed in Congress while they’re tied up with the second impeachment of President Donald Trump.

Wall Street is also worried that Biden will raise taxes to pay for his big money giveaway.

Daily March E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down when sellers took out the previous main bottom at 12767.25 earlier today. A move through 13028.75 will change the main trend to up.

The minor range is 12491.25 to 13125.00. Its 50% level at 12808.25 is currently being straddled.

The short-term range is 12217.00 to 13125.00. Its 50% level at 12671.00 is the next potential downside target.

Short-Term Outlook

The direction of the March E-mini NASDAQ-100 Index futures market into the close will be determined by trader reaction to the pivot at 12808.25.

Bearish Scenario

A sustained move under 12808.25 will indicate the presence of sellers. If this move creates enough downside momentum then look for a test of the next pivot at 12671.00. This is a potential trigger point for an acceleration to the downside with 12491.25 the next target.

Bullish Scenario

A sustained move over 12808.25 will signal the presence of buyers. If this can generate enough upside momentum then look for a strong short-covering rally.

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

US Stock Market Overview – Stocks Close Lower; Led Down by Energy; Retail Sales Disappoints

U.S. stocks moved lower on Friday, as weak retail sales weighed on sentiment. Most sectors in the S&P 500 index were lower, driven down by Energy shares, Utilities bucked the trend. For the second consecutive month, retail sales were negative and more fragile than expected. The spending seen in mid-2020 was driven by a stimulus that is now on deck for the Biden administration. Producer prices rose in December and were buoyed by energy and food. The bid banks kicked off the earnings season on Friday. J.P. Morgan was the standout, but the financial sector fell as traders appear to be taking profits.

Retail Sales Fall

U.S. retail sales dropped in  December as lockdowns to battle the spread of COVID-19 undercut spending. According to the U.S. Commerce Department, Retail sales dropped 0.7% last month. November was revised down to show sales declining 1.4% instead of 1.1% as previously reported. Expectations had been for retail sales to be unchanged in December.

Core retail sales were also lower. Excluding automobiles, gasoline, building materials and food services, retail sales tumbled 1.9% last month after a downwardly revised 1.1% decline in November. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have decreased by 0.5% in November.

U.S. producer prices increased in December. According to the Labor Department, U.S. Producer price index increased 0.3% in December after nudging up 0.1% in November. In the 12 months through December, the PPI rose 0.8%, matching November’s gain. Excluding food, and energy, producer prices increased 0.4%. The core PPI inched up 0.1% in November. In the 12 months through November, the core PPI gained 1.1% after rising 0.9% in November.

JP Morgan Chase Beats

J.P. Morgan Chase reported profits of $12.14 billion or $3.79 per share, better than expected. The bank reported $29.22 billion for the quarter in revenue, up 3% from a year earlier, also topping analysts’ expectations for $28.67 billion. JPMorgan posted a record revenue of $119.54 billion, up 4% from 2019. The growth was powered by trading as clients were eager to raise capital and trade securities amid a troubled economy and record-high markets.