We're nearing the end of the year 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 fell by 3.82% last week.
On the economic data front, the unemployment rate remained unchanged MoM at 3.7% in November, in-line with estimates. Initial jobless claims fell to 231K in week ended December 1st (forecast 225K) from 235K in the prior week. Also, factory orders decreased by 2.1% MoM in October (expected -2.0%). Final readings of durable goods orders fell 4.3% MoM in October (estimated -2.4%, preliminary -4.4%). The University of Michigan sentiment index remained unchanged MoM in a preliminary estimate of 97.5 in December (estimated 97). Finally, the U.S. Federal Reserve released their Beige Book stating that the economy expanded at a modest or moderate pace from mid-October through later November. Also, some districts cited that "optimism has waned" due to the impacts of tariffs, rising interest rates and a tight labor market.
In the short-term, we remain bullish on the S&P 500 (SPX) as prices test key support set at Oct lows of 2600. Prices still remain inside a consolidation zone between 2600 and 2816.25. We anticipate further advance towards 2720 and 2762.
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.
Regarding the sectors, the worst performing stocks were in the Banks (-7.41%), Automobiles & Components (-6.2%) and Transportation (-5.91%) sectors.
We had some big movers last week. Here's a look at the 4 most notable:
- Ulta Beauty (ULTA -15.28% WoW to $254.47) reported 3Q diluted EPS of $2.18 (estimated $2.16) vs. $1.7 a year ago on net sales of $1.56B, in-line with estimates, from $1.34B in the previous year. Comparable sales jumped by 7.8%, aligned with expectations, while net income increased by 25.3% YoY to $131M. The Co expects 4Q net sales in the range of $2.09B - $2.1B and anticipates comparable sales to advance by 7% - 8%.
- Lululemon Athletica (LULU -12.04% WoW to $113.87) unveiled 3Q adj. EPS of $0.75 (estimated $0.69) vs. $0.56 a year ago on net revenue of $747.7M (expected $737.4M) compared to $619M a year earlier. Comparable sales jumped by 18%, beating expectations of 13.6%. The Co expects 4Q EPS in a range of $1.64 - $1.67 (estimated $1.65) and net revenue in a range of $1.12B - $1.13B (forecasted $1.12B). Finally, the Co raised its FY guidance on adj. EPS to a range of $3.65 - $3.68 (expected $3.6) vs. prior view of $3.45 - $3.53 and anticipates FY net revenue between $3.24B and $3.25B (estimated $3.23).
- The Cooper Cos (COO -12.4% WoW to $243.01) reported 4Q adj. EPS of $2.87 (estimated $2.96) vs. $2.65 a year ago on net sales of $652M (expected $645M) from $562M in the prior year. Net income rose to $101M from $89M last year. The Co sees FY19 adj. EPS of $11.30 - $11.70 (consensus $12.08) and revenue of $2.60B - $2.66B (estimated $2.67B).
- Dollar General (DG -7.39% WoW to $102.7) reported 3Q diluted EPS of $1.26, in-line with estimates, vs. $0.98 a year ago on net sales of $6.42B (forecasted $6.39B) from $5.9B in the previous year. Comparable sales improved by 2.8%, beating expectations of 2.4%. The Co cut its FY guidance on EPS to a range of $5.85 - $6.05 (estimated $6.11) vs. the prior view of $5.95 - $6.15.
Earnings preview this week:
- ADBE: On Thursday, Adobe is expected to report 4Q EPS of $1.89 vs. $1.26 last year on higher revenue of $2.4B from $2B in the previous year. Cloud software stocks like Adobe, recently gained momentum as Salesforce.com (CRM) posted FY2020 sales estimates that exceeded expectations. From a chartist point of view, the RSI is above its neutrality area at 50 while the MACD is negative and above its signal line. The MACD must break above its zero level to call for further upside. Moreover, the stock is above its 20 and 50 day MA (respectively at 237.84 and 248.41). If prices don't break below $226.7, we anticipate the stock to reach a higher level of $291.
- COST: On Thursday as well, Costco Wholesale is likely to announce 1Q EPS of $1.62 vs. $1.36 a year ago on revenue of $34.8B compared to $31.8B in the prior year. The Co unveiled that comparable sales in November grew by 9.2%, beating forecasts of 5.4%. Looking at the chart, the RSI is below its neutrality area at 50 while the MACD is above its signal line and negative. The configuration is mixed. Moreover, the stock is trading under both its 20 and 50 day MA (respectively at 228.88 and 228.69). We expect prices to continue higher towards $245.5 with a stop-loss at $215.3.
- RHT: On Monday the 17th in the after-hours, Red Hat is anticipated to post 3Q EPS of $0.87 vs. $0.73 last year on revenue of $852.9M from $749M a year earlier. In other news, the Co was cut to "neutral" from "buy" at Citi. From a technical point of view, the RSI is below its neutrality area at 50 while the MACD is negative and above its signal line. The configuration is mixed. Moreover, the share stands below its 20 and 50 day MA (respectively at 125.96 and 136.35). Red Hat is currently trading near its 52 week low at 116.31 reached on 11/10/18. As long as the stock is trading above $114.3, we are looking at the next target of $135.6.
- ORCL: On the same day in the after-hours, Oracle is awaited to unveil 2Q EPS of $0.78 vs. $70 a year ago on revenue of $9.5B compared to $9.6B in the previous year. According to CNBC, Amazon's (AMZN) databases will be off the Co's databases by the end of the year. Technically speaking, the RSI is below its neutrality area at 50 while the MACD is below its signal line and negative. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at 48.9 and 48.76). We expect the stock to witness additional pressure towards $42.4 with a stop-loss of $48.8.
On Friday, we had some bearish technical events in the following equities:
50D MA cross under: AbbVie (ABBV -3.73% to $86.96), Amgen (AMGN -3.8% to $191.44), Biogen Idec (BIIB -3.05% to $316.73), Booking Holdings (BKNG -2.54% to $1834.51), Charter Communications (CHTR -3.39% to $315.7), Costco Wholesale (COST -3.58% to $224.86), Danaher (DHR -2.85% to $101.87), Intel (INTC -4.4% to $46.24), Mastercard (MA -3.2% to $196.5), Microsoft (MSFT -4% to $104.82), PayPal (PYPL -3.55% to $82.77), Pfizer (PFE -2.36% to $43.92), Visa (V -2.79% to $137.11).
Relative strength stock/S&P500 50D MA cross under: Alphabet (GOOGL -2.92% to $1046.58), Alphabet Class C (GOOG -3.01% to $1036.58), Gilead Sciences (GILD -2.91% to $68.15), Texas Instruments (TXN -5.08% to $92.38).