Stock Market Investing Action Plan — T-Bird Week: Deere, Baidu, Dick’s (And A Day Off)

November 18, 2022

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The stock market set up in a holding pattern heading into the short Thanksgiving holiday week. The Dow finished all but flat after a series of tight daily closes. The S&P 500 and the Nasdaq whittled off thin losses for the week, but maintained crucial technical support. Thanksgiving week, with exchanges closed on Thursday and an early close on Friday, is traditionally a low-volume stretch for the stock market, although the S&P 500 has tended to move higher for the week over the past five years. Deere (DE) reports. So does Baidu (BIDU). And Dick’s Sporting Goods (DKS) leads the ongoing parade of retail earnings reports, all under the radar after massive earnings-fueled gains from Ross Stores (ROST), Walmart (WMT) and Foot Locker (FL) over the past week.

Stocks To Watch: Learning to Play The Rebound

In choppy markets in particular, a leading stock will sometimes break out or flash buy signals, then quickly fizzle or fail. But investors who get shaken out shouldn’t sour on the stock. If the stock sets up again, don’t dismiss the new entry. Top names including General Motors (GM), MercadoLibre (MELI), Pure Storage (PSTG), Shift4Payments (FOUR) and On Semiconductor (ON) all moved above buy points in recent days, fueled by the market rally. When the rally pulled back from Tuesday’s highs, these names all scaled back. The trick is to keep them all on watchlists, because they could easily rebound — overtaking either their prior buy points or new entries.

Econ/Fed Calendar: A Preholiday Data Burst

Investors will get a one-day feast of economic reports on Wednesday, with nothing else scheduled for the holiday-shortened week. Minutes from the latest Fed meeting, due out at 2 p.m. ET, often can move markets, but that probably won’t be the case this time. That’s because the meeting preceded the October CPI report, which markets saw a game-changer, though some Fed officials made clear over the past week that they disagree.

CPI Inflation Rate Cools Much More Than Expected; Dow Jones Jumps

Initial jobless claims, which have been trending a bit higher lately, are due at 8:30 a.m. Wednesday, along with durable goods orders, a window into business equipment investment trends. A preliminary read of the IHS Markit manufacturing survey index will be out at 9:45 a.m., followed by new home sales and the University of Michigan consumer sentiment index at 10 a.m.

Stock Market Perspective: Uptrend Remains Unfettered

The stock market continues to alternate between up and down weeks, losing ground this week. The Dow ran a string of very tight daily closes, with upside trade capped just below the 34,000 level and dipping on the downside Thursday to confirm short-term support at its 10-day moving average. The S&P 500 is trying to top the 4,000 level, while the Nasdaq notched its second weekly close above its 50-day moving average. The indexes avoided distribution all week, placing no new pressure on the market’s confirmed uptrend. The Dow has beaten other indexes to regain the 200-day line. The S&P 500 is nearing the 200-day level, which could be the next big test for the market.

Stock Market Earnings: Inflation, Energy Buck Up Q3

Earnings season starts to slow heading into the Thanksgiving holiday week, a period when trading volume tends to fall off sharply. Among the 469 S&P 500 companies that reported so far, according to S&P Global, 318 beat their analyst earnings estimates, 120 missed and 31 just met views. Still, aggregate earnings dropped 2.5% for the quarter. Without energy, earnings were down 11.2%. Almost 71% of companies reporting topped revenue forecasts. S&P 500 revenue climbed 11.6% so far in Q3, according to Yardeni Research, a record high. Adjusted for inflation, revenue gained 4.2%, which was just shy of its Q4 2021 record.

Industrials: Deere Riding On Q4 Guidance

Ag and construction equipment bellwether John Deere turns in Q4 results on Wednesday. The stock is up 24% since late September, and in a buy zone above a cup-with-handle entry. Analysts project the farm and construction equipment maker will post a 73% EPS jump to $7.12 on a 28% revenue gain to $14.452 billion. That would mark the third straight quarter of accelerating sales growth. Agriculture equipment markets have been subject to the same supply chain disruptions as automobiles, driving new and used prices to record highs. So guidance and the company’s outlook will be key.

Analysts at Cowen expect a strong outlook for fiscal 2023 but think this could represent a cycle peak, after a long cycle of elevated replacement demand. Farmer sentiment has declined due to economic uncertainty, rising interest rates, low water levels on the Mississippi, and uncertainty about the farm bill in a new political landscape, they said in a Nov. 10 note. DE stock is basing after a strong rally since late July.

China Stocks: Shanghai Leads Rebound

China’s markets have staged an uneven bounce, with Hong Kong’s Hang Seng Index up nearly 23% from the end of October, while the Shanghai Composite added just over 7%. The iShares MSCI China ETF (MCHI) has climbed almost 26%. And the KraneShares CSI China Internet ETF (KWEB) has a 39% gain since Oct. 24. That keeps earnings from China-based names in focus in the coming week, with search engine giant Baidu (BIDU) and retail leader Vipshop Holdings (VIPS) both due on Tuesday. Canadian Solar (CSIQ), which is headquartered in Canada but with its operations in China, also reports on Tuesday.

Retail Earnings: Dick’s In Focus After Foot Locker

Retailers continue to bat clean up for the Q3 season, with an assortment of apparel, sporting goods, electronics and department store names reporting in the week ahead. Earnings are generally seen coming in sharply lower, with sales views generally flat to down. That sets a low bar for companies who do manage some positive growth. Chico’s (CHS) and Dick’s Sporting Goods (DKS) are poised for possible breakouts. Best Buy (BBY), Urban Outfitters (URBN), Abercrombie & Fitch (ANF), Burlington Stores (BURL), Guess (GES) and Movado (MOV) also report in the week ahead.

Stock Market Earnings

Monday:

Agilent Technologies (A) will report its fiscal fourth-quarter earnings late Monday. Analysts polled by FactSet expect the life sciences giant to earn $1.38 per share, minus some items, on $1.76 billion in sales. Earnings would jump 14% as sales rise 6.5%.

Dell Technologies (DELL) will report its fiscal third-quarter results late Monday. Analysts expect the computer maker to earn $1.61 a share on sales of $24.4 billion. That would translate to year-over-year declines of 32% in earnings and 14% in revenue amid slumping PC sales.

Tuesday:

Medtronic (MDT) is on deck to post its fiscal second-quarter report early Tuesday. Sales are expected to sink almost 2% to about $7.7 billion. Adjusted profit is projected to come in at $1.28 a share, down 3%.

HP (HPQ) will post its fiscal fourth-quarter results late Tuesday. Wall Street is modeling HP earnings of 84 cents a share on sales of $14.8 billion for the maker of PCs and printers. HP’s earnings and sales are each seen declining 11% year over year.

Autodesk (ADSK) will release its fiscal third-quarter results late Tuesday. Analysts predict the design and workflow software maker will earn $1.70 a share, up 28% year over year, on sales of $1.28 billion, up 14%.

Jack In The Box (JACK) reports fourth-quarter earnings early Tuesday. Analysts project earnings falling 22% to $1.36 per share for the restaurant chain, according to FactSet. Meanwhile, the Street forecasts revenue growing 41% to $392 million.

Dycom Industries (DY) reports Q3 earnings early Nov. 22. Analysts estimate EPS growth of 39% to $1.32 with revenue growing 14% to $975.5 million. Analysts say customer AT&T could be slowing its build-out of fiber-optic wiring to homes in the back half of 2022. Dycom digs small trenches to bury fiber-optic wiring, breaks up and repairs sidewalks if needed, and strings the fiber wiring aerially to homes and businesses via utility poles.