Nasdaq Ekes Out Record Finish as Wall St Ends Higher

The energy sector rose, reversing most of the losses suffered during the first three days of the week. Thursday’s performance was fueled by U.S. crude prices jumping 2% on a sharp decline in U.S. inventories and a weaker dollar.

Cabot Oil & Gas Corp and Occidental Petroleum Corp were among the largest risers, with oil majors Exxon Mobil and Chevron Corp also posting solid gains.

The technology index slipped into negative territory, as some of the industry’s largest companies saw their recent upward momentum stall. Inc, Microsoft Corp, Facebook Inc and Google-owner Alphabet Inc were all under water. A notable exception was Netflix Inc, which hit an all-time high intraday.

U.S. stocks have regularly hit record highs over the past few weeks as a solid corporate earnings season and hopes of continued central bank support underpinned confidence as data showed the country’s post-pandemic economic growth was beginning to slow.

Data on Thursday showed the number of Americans filing new claims for jobless benefits fell last week, although the focus will be on the Labor Department’s monthly jobs report on Friday to set the stage for the Fed’s policy meeting later this month.

The report is likely to show job growth slowed to 750,000 in August from 943,000 the previous month.

“You have to see very wide beats or misses in this data to really change people’s minds,” said Greg Boutle, U.S. head of equity and derivative strategy at BNP Paribas.

“Investors are either in this renormalization camp that thinks inflation will not happen, or they believe there will be some persistence to inflation. Really, it will be a collection of beats or misses that will move the needle for investors and the Fed, rather than a single data point.”

Unofficially, the S&P 500 gained 12.92 points, or 0.29%, to end at 4,537.01 points, while the Dow Jones Industrial Average  gained 129.38 points, or 0.37%, to 35,441.91. The Nasdaq Composite  rose 21.15 points, or 0.14%, to 15,330.53.

Despite deadly flash floods in New York City, trading on Wall Street was operating normally.

Wells Fargo rose after three straight sessions of losses. The lender had been weighed by a report it could face further regulatory sanctions over the pace of compensating victims of a years-long sales practice scandal.

Contracting services company Quanta Services Inc jumped to a record high after saying it would buy privately held Blattner Holding Company in a deal valued at about $2.7 billion.

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

(Reporting by Shashank Nayar in Bengaluru and David French in New York; Editing by Aditya Soni and Lisa Shumaker)

A Post-Covid Hangover – Should You Worry About Your Portfolio?

Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.

Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.

The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.

Data to watch

Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.

There will be plenty more earnings next week too, including Simon Properties and Zoom on Monday; Activision Blizzard, Alibaba, Amgen, Clorox, ConocoPhillips, Eli Lilly, Fidelity, Match Group, Monster Beverage, Occidental Petroleum, and Phillips 66 on Tuesday; Allstate, CVS, Etsy, General Motors, Kraft Heinz, Marathon Petroleum, MetLife, MGM Resorts, Rocket Companies, Roku, Trane, and Uber on Wednesday; Adidas, AMC, Carvana, Cigna, Cloudflare, Corteva, Duke Energy, Kellogg, Moderna, Nintendo, Novo Nordisk, Siemens, Square, Wayfair, Zillow, and Zoetis on Thursday; and Dish Network, Dominion Energy, and DraftKings on Friday.

Insider Accumulation

ES ##-## (Daily) 2021_08_01 (19_25_02)

I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.

The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.

On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.

Occidental Petroleum Shares Drop About 4% as Q3 Earnings Disappoint

Occidental Petroleum, an international oil & gas exploration and production company, reported a worse-than-expected loss in the third quarter as the ongoing COVID-19 pandemic hammered demand for fuel, sending shares down about 4% in after-hours trading on Monday.

The oil and gas producer said its net loss came in at $3.8 billion, or $4.07 per diluted share, and an adjusted loss attributable to common stockholders of $783 million, or $0.84 per diluted share. That was worse than the market expectations for a loss of $0.73 per diluted share.

“Occidental Petroleum (OXY) beat 3Q FCF estimates on 38% lower capex and better results from chems and midstream, while production was in line with the street. FY20 capex is unchanged, as 4Q spend is guided 24% above ests driven by activity additions, and adjusted production guide is 6% below ests, hurt by GOM downtime/Permian timing, even as OXY adds another 15 wells in the Permian this year and 1 rig in the DJ,” said David Deckelbaum, equity analyst at Cowen and Company.

Occidental Petroleum shares plunged about 4% to $11.75 in after-hours trading on Monday; the stock is down around 70% so far this year.

Occidental Petroleum Stock Price Forecast

Thirteen equity analysts forecast the average price in 12 months at $12.82 with a high forecast of $19.00 and a low forecast of $8.00. The average price target represents a 4.82% increase from the last price of $12.23. From those 13 analysts, three rated “Buy”, eight rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $11 with a high of $29 under a bull-case scenario and $1 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the oil & gas exploration company’s stock. UBS lowered the stock price forecast to $10 from $12 and Mizuho decreased the target price to $11 from $16.

Several other analysts have also recently commented on the stock. Occidental Petroleum had its price target dropped by equities research analysts at Bank of America to $29 from $30 in Sept. The firm currently has a “buy” rating on the oil and gas producer’s stock. JP Morgan cuts target price to $12.50 from $13; Simmons Energy lowered the target price to $12 from $19; Capital One Securities cuts target price by $2 to $12.

Analyst Comments

“Leverage remains elevated, but maturity outlook is manageable. Occidental Petroleum (OXY) has continued to extend maturities following the recent opening of the high-yield debt market. High-quality assets and differentiated exposure to a low carbon future. In addition to operating high-quality upstream assets, OXY has achieved peer-leading emission reductions and maintains investments in low carbon technologies,” said Devin McDermott, equity and commodities strategist at Morgan Stanley.

“Reasonable valuation. Since the oil price collapse on March 6, OXY has meaningfully underperformed large-cap and integrated peers. We now forecast an above-average FCF yield and see a more balanced risk-reward,” McDermott added.

Check out FX Empire’s earnings calendar

Occidental Petroleum Posts Loss of $8.35 billion in Q2 as COVID-19 Batters Oil Demand; Target Price $7

Occidental Petroleum, an international oil & gas exploration and production company, reported a loss of $8.35 billion in the second quarter, largely affected by the steep decline in energy prices due to significant drop in demand amid COVID-19 pandemic, sending its shares down about 6% in after-hours of trading on Monday.

The oil and gas producer said its net loss came in at $8.35 billion, or $9.12 per share, in the quarter ended on June 30, 2020, down from $635 million earnings, or 84 cents per share, a year earlier. Excluding one-time items, Occidental Petroleum lost $1.76 per share, compared with analysts’ average estimates of $1.68, according to Refinitiv IBES, Reuters reported.

“Occidental Petroleum’s 2Q EBITDAX was below our estimates on pricing but exceeded consensus. The focus will be on 2H20 guide that includes 3Q production 7% below our estimates given larger domestic declines and 4Q that is 10% below,” said David Deckelbaum, equity analyst at Cowen.

“Without asset sale clarity, Occidental’s declining asset base will be in focus, particularly as capex shifts domestically heading into 2021 w/ guided maintain capex of $2.9 billion that is in-line with our model.”

Occidental expects its oil and gas production to decline 13% in the ongoing quarter over last, and more 5% in the last quarter, to 1.16 million barrels per day. The average price Occidental received for crude oil plunged over 60% to $23.17 per barrel in Q2 as the coronavirus outbreak crushed demand for fuel.

Occidental shares slumped about 6% to $15.55 in after-hours of trading on Monday. The stock is down over 60% so far this year.

Executive comment

“We continue to make progress on our debt structure and have significantly exceeded our cost savings targets while delivering operational excellence across our business,” President and Chief Executive Officer Vicki Hollub said in a press release.

“These decisive financial and operational actions reflect our leadership as a low-cost operator, positioning us for success when market conditions improve.”

Occidental Petroleum stock forecast

Sixteen analysts forecast the average price in 12 months at $18.58 with a high forecast of $33.00 and a low forecast of $8.00. The average price target represents a 12.74% increase from the last price of $16.48. From those 16, four analysts rated ‘Buy’, six analysts rated ‘Hold’ and six rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $7 with a high of $29 under a bull scenario and $1 under the worst-case scenario. JP Morgan raised its price target to $19 from $17.

Several other equity analysts have also updated their stock outlook. Occidental Petroleum had its price target boosted by Piper Sandler to $20 from $13.00. Piper Sandler currently has a neutral rating on the oil and gas producer’s stock. Barclays decreased its price objective to $20 from $21 and set an equal weight rating on the stock. At last, SunTrust Banks increased their price objective to $25 from $13.

We think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a selling opportunity. However, can sell with a target price of $7 in a worst-case scenario.

Analyst comment

“Onerous debt maturity schedule. Occidental Petroleum has $11 billion of debt due over the next three years in a backdrop of limited free cash flow and capital markets access. The risk to asset sale execution. At current commodity prices, we see risk to additional proceeds from asset sales,” said Devin McDermott, equity analyst and commodities strategist at Morgan Stanley.

“Meaningful leverage reduction is challenged at current commodity prices. We project elevated leverage (includes 100% of preferred equity) of 5-6x net debt/EBITDAX over the next two years and 4.5-5x thereafter,” the analyst added.

Upside and Downside Risks

1) Higher commodity prices. 2) Service cost deflation. 3) Asset sale execution. 4) Upside to synergies associated with the acquisition of Anadarko Petroleum, Morgan Stanley highlighted as major upside risks to Occidental Petroleum.

1) Lower commodity prices. 2) Service cost inflation. 3) Regulatory risk in Colorado and global geopolitical risk. 4) Limited asset sale execution. 5) Potential to not achieve synergy targets associated with APC acquisition, are the major downside risks.