We're into December and there have been numerous big movers, significant technical events, earnings preview and notable corporate news! This article covers a brief rundown of this week's top U.S. Market pivotal movement written by the head of our North American Research Desk, Gary Christie.
The S&P 500 climbed 4.84% last week.
On the economic data front, initial jobless claims reached 234k in week ended November 24th (expected 220k) from 224k in the prior week. MBA mortgage applications rose by 5.5% in week ended November 23rd from a decline of 0.1% in the previous week. In other news, annualized GDP in a second reading came out to 3.5%, in-line with estimates and unchanged vs the first reading, from 4.2% in 2Q. New home sales added 544k units in October (forecasted 575k) compared to 597k in September while pending home sales fell by 2.6% MoM in October (forecasted 0.5%) from an increase of 0.7% in September. The Fed released the meeting minutes of its November 7-8th meeting stating that an appreciation of the dollar may pose a risk for domestic economic growth and inflation and reiterated the need for further gradual increase in the benchmark rate. Finally, the FOMC also discussed the idea of targeting the Overnight Bank Funding Rate instead of the Federal Funds Rate.
In the short-term, we remain bullish on the S&P 500 (SPX). Prices are now testing the 200-day moving average inside a bullish ascending triangle pattern (not confirmed yet). The March resistance area at 2715 and the 20-day MA provides support. Look for the RSI to break above a symmetrical triangle pattern to further advance the SPX towards key resistance at 2816.5.
On a longer time horizon (weekly chart), the SPX is bearish below the November high of 2816.5. The index broke below a long term rising supporting trendline and 50-week moving average. Downside targets are set at 2600 and 2531 in extension.
The Dow Jones Transportation index continues its climb past its 50-day moving average after confirming an Inverted Head and Shoulders bottom reversal pattern.
Regarding the sectors, the best performing stocks were in the Retailing (+8.57%), Software & Services (+7.18%) and Semiconductors & Semiconductor Equipment (+6.09%) sectors.
We had some big movers last week. Here's a look at the 8 most notable:
- Workday (WDAY +21.25% WoW to $164) announced 3Q adj. EPS of $0.31 (estimated $0.15) vs. $0.24 a year ago on revenue of $743.2M (forecasted $722.8M) from $555.4M in the previous year. Net loss dug deeper towards $153.3M vs. $85.5M a year earlier. The Co expects subscription revenue in 2019 to reach $2.375B - $2.377B.
VMware (VMW +9.38% WoW to $167.34) unveiled 3Q adj. EPS of $1.56 (estimated $1.5) vs. $1.23 last year on revenue of $2.2B (forecasted $2.17B) compared to $1.94B in the prior year. The Co boosted its 2019 outlook on adj. EPS to a range of $6.22 (expected $6.16) vs. prior view of $6.14 and raised its outlook on revenue to $8.88B (estimated $8.83B) vs. prior view of $8.82B.
Nielsen (NLSN +8.25% WoW to $27.17) gained momentum as the Financial Times reported that Madison Dearborn is interested in bidding for all or part of the Co.
Salesforce.com (CRM +16.99% WoW to $142.76) reported 3Q adj. EPS of $0.61 (estimated $0.5) vs. $0.42 a year ago on revenue of $3.39B (forecasted $3.37B) from $2.7B in the previous year. The Co expects 4Q2019 adj. EPS in a range of $0.54 - $0.55 and revenue to reach $3.551B - $3.561B. Finally, the Co expects FY19 adj. EPS in a range of $2.6 - $2.61 with revenue of $13.23B - $13.24B.
Tiffany & Co (TIF -11.14% WoW to $91) announced 3Q diluted EPS of $0.77, in-line with estimates, vs. $0.8 a year ago on net sales of $1.01B (forecasted $1.05B) from $976M in the previous year. Net income declined by 5.25% YoY to $95M. Comparable sales in the Americas grew by 5%, lower than estimates of 6.8%, while the same figure in Europe ended flat vs. expectations of 3%.
Humana (HUM +7.7% WoW to $329.47) announced that it will repurchase $750M of its common stock as part of its $3B share repurchase program announced on December 14th, 2017. In other news, the Co revised its net membership growth estimate for its individual Medicare Advantage products for year ending on December 31st 2019 to 350k - 400k members vs. prior estimate of 250k - 300k. Finally, the Co reaffirmed its FY18 guidance on adj. EPS of $14.4.
PGE Corp (PCG +10.65% WoW to $26.38) finished the day as the biggest mover in the S&P500 on Tuesday as Bloomberg reported that a potential bill may extend legislation that allows the Co to issue bonds in order to pay off the costs of the 2017 wildfires to include the recent Northern California fire.
General Motors Co (GM +5.62% WoW to $37.95) is planning on cutting salaried and salaried contract staff by 15% in North America while also reducing the amount of executives by 25% to flatten decision making. This initiative, as well as a realignment of its manufacturing capacity, are expected to "increase adj. automotive free cash flow by $6B by year-end 2020 on a run-rate basis".
Earnings preview this week:
- HPE: On Tuesday in the after-hours, Hewlett Packard Enterprise is anticipated to post 4Q EPS of $0.424 vs. $0.31 a year ago on revenue of $7.8B vs. $7.7B in the previous year. Recently, the Co acquired BlueData, "a leading provider of software that transforms how enterprises deploy artificial intelligence and big data analytics". Technically speaking, the RSI is below 50 while the MACD is negative and below its signal line. The configuration is negative. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 15.34 and 15.67). We expect prices to reach a lower target of $13.4 with a stop-loss of $15.6.
- HRB: On Wednesday in the after-hours, H&R Block is awaited to announce 2Q LPS of $0.929 vs. $0.709 last year on revenue of $139.7M from $140.9M in the prior year. In other news, the Co declared a quarterly cash dividend of $0.25 per share payable January 2nd, 2019 to shareholders of record as of December 3rd, 2018. Looking at the chart, the RSI is above its neutrality area at 50 while the MACD is below its signal line and positive. The stock could retrace in the short term. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at 27.75 and 26.62). As long as the stock is trading above $26.8, we are looking at the next target of $30.4.
- KR: On Thursday, Kroger is expected to report 3Q EPS of $0.436 vs. $0.44 a year ago on revenue unchanged YoY at $27.7B. Recently, Templeton Global Advisors boosted its stake in the Co. From a technical point of view, the RSI is below 50 while the MACD is below its signal line and positive. The MACD must penetrate its zero line to expect further downside. Moreover, the stock is trading under its 20 day MA (30.27) but above its 50 day MA (29.17). The stock is anticipated to reach lower levels towards $26.8 with a stop-loss of $31.4.
- AVGO: On Thursday in the after-hours, Broadcom is likely to unveil 4Q EPS of $5.53 vs. $4.59 last year on higher revenue of $5.4B compared to $4.8B a year earlier. The Co's coverage was resumed at "equal-weight" at Morgan Stanley. From a chartist point of view, the RSI is above 50 while the MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is trading above its 20 day MA (227.36) but under its 50 day MA (234.21). We expect the stock to feel some pressure towards $195.7 with a stop-loss of $247.1.