Stock Market Investing Action Plan: Beware The Bear’s Bottom

A maybe even more wild and wooly week than those we’ve been having ended with the stock market in the early stages of a rally attempt. But that was only after the Dow dipped to its lowest level since 2020, and numerous leading stocks suffered significant chart damage. The coming week pledges plenty of drama, with earnings from Tesla, Netflix and more than a half dozen Dow Jones stocks on tap. There is also the possibility of a follow-through day, although it isn’t likely that this bear has yet shown investors its bottom.

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Stocks To Watch: 5 Medical Stocks Look Healthy

In a tough market, medical stocks often hold up well, as health care spending tends to be insulated from economic shifts. Health insurer Cigna (CI), drug distributor Cardinal Health (CAH), drug giant Eli Lilly (LLY), Vertex Pharmaceuticals (VRTX) and medical products maker Shockwave Medical (SWAV) are all still showing relative strength, while trading close to buy points. New highs by Cigna disrupted a possible flat base, but the stock remains well positioned for a move higher. Cardinal, meanwhile, is in a flat base testing 10-week support. Lilly is pulled back below its entry, and is testing support. All could be deemed defensive growth names, with the exception of Shockwave.

Economic Calendar: A Housing Recession Checkup

The coming week’s economic calendar features a trio of housing reports, which are bound to be on the weak side with 30-year mortgage rates now hitting 20-year highs near 7%. The NAHB Housing Market Index is out Tuesday at 10 a.m. ET. Housing starts and building permits for September are due on Wednesday at 8:30 a.m. Existing home sales for September will be reported Thursday at 10 a.m. However,  a couple of non-housing reports could help reinforce the sense that economic weakness is broadening. Industrial production, out Tuesday at 9:15 a.m., could show a 0.4% decline for September, Deutsche Bank economists predict, after August’s 0.2% slippage. The Fed’s Beige Book anecdotal survey of economic conditions, released ahead of the Nov. 1-2 meeting, is out Wednesday at 2 p.m.

Stock Market Perspective: The Destruction Continues

The stock market’s surge Thursday wasn’t enough to offset losses, leaving the Nasdaq and S&P 500 with the fourth weekly loss in the past five weeks, and the seventh in the past nine weeks. The Dow Jones Industrial Average managed to end the week higher, thanks largely to strength in its health care and banking components. Indexes are technically in a new rally attempt. That could mean a follow-through bottoming signal as early as this week. But the destruction in leading stocks and lack of strong new leadership suggest a bottom remains elusive. Nonetheless, investors should be watching index signals. The highlight of the week was Thursday’s bullish reversal. But it left traders scratching their heads because the CPI showed accelerating inflation, not what Wall Street wants.

EV Industry: Analysts Shift Targets Ahead Of Tesla Earnings

A four-week slide left Tesla (TSLA) shares down 33% from a Sept. 21 high as the company prepares to report third-quarter results on Wednesday. Wells Fargo lowered Tesla’s price target to 230 from 280 on Friday, expecting a “slight beat” as currency impact counters new pricing strength. But the note raised Tesla’s ’23 through ’26 earnings outlook, based on benefits from the Inflation Reduction Act. The IRA was a key incentive for Evercore ISI’s price target increase on the stock to 300, from 267, on Thursday. Wells Fargo estimated Tesla’s production tax credits from the bill at $3,100 per vehicle, pointing to a potential, $2.8 billion in savings.

Streaming Leaders: Netflix Subscriber Growth In Focus

Netflix (NFLX) will report its third-quarter results late Tuesday. The streaming video leader predicted it would add 1 million subscribers in the September quarter, following two straight quarters of member losses. Analysts polled by FactSet expect Netflix to earn $2.16 a share, down 32% year over year, on sales of $7.85 billion, up 5%. The company’s guidance will key on Netflix’s cheaper, advertising-subsidized service tier set to launch on Nov. 3. That service, called Netflix Basic With Ads, will cost $6.99 a month, compared with $9.99 a month for the ad-free version. It will be available in 12 countries, including the U.S., at launch.

Investment Brokers: Schwab, Interactive Basing Ahead Of Earnings

Charles Schwab (SCHW) and Interactive Brokers (IBKR) are on deck to report earnings Monday and Tuesday, respectively. SCHW stock is basing and its Relative Strength Rating is at a 52-week high leading up to the report. Analysts expect Charles Schwab’s earnings to spike 25% to $1.05 per share on 18% revenue growth to $5.41 billion. For Interactive Brokers, Wall Street predicts a 23% jump in earnings to 96 cents per share and a 22.8% revenue increase. IBKR stock is trading in a cup base about 15% below its buy point of 82.93. Its relative strength line is at the highest point since early 2021 ahead of results.

Dow Industrials: Blue Chips Ramp Up Reporting

Walgreens, JPMorgan and UnitedHealth Group set a high bar, kicking off the Dow industrials’ Q3 reporting season with strong results and stock gains. The outlook for the coming week is less promising, with Johnson & Johnson (JNJ), Goldman Sachs (GS), IBM (IBM), Procter & Gamble (PG), Travelers (TRV), Verizon (VZ), American Express (AXP) and Dow (DOW) all due to report. The financials — Goldman Sachs and AmEx — have the strongest estimates, all others are mixed. But the surprises turned in by blue chips this past week add a note of optimism. Meanwhile, the Dow recovered to a second weekly advance, after dipping to its lowest level since Oct. 2020.

Airlines: United, American Follow Delta’s Bullish Report  

Following Delta Air Lines (DAL) strong report on Thursday, fellow air carrier United Airlines (UAL) will announce Q3 earnings after the stock market closes on Tuesday, Oct. 18. Analysts forecast earnings growing to $2.26 per share, up from a loss of $1.02 per share a year ago. Sales are expected to increase 65% to $12.7 billion. American Airlines (AAL) will then announce Q3 earnings Thursday morning. Wall Street sees earnings per share ballooning to 53 cents, up from a loss of 99 cents a year ago. Analysts are also expecting revenue to grow 49% to $13.4 billion, according to FactSet. Alaska Air Group (ALK) also reports Q3 financials Thursday before the market opens. EPS is expected to jump 62% to $2.38 while sales could increase 47% to $2.8 billion.

Stock Market Earnings Briefs

Tuesday:

Lockheed Martin (LMT) stock is consolidating ahead of its earnings report Tuesday morning and its stock relative strength is at a new high. Analysts expect the defense contractor’s earnings to catapult to $6.66 per share from $2.21 last year. And revenue is seen edging up 4% to $16.65 billion.

Intuitive Surgical (ISRG) is on deck to report its third-quarter earnings late Tuesday. Analysts expect the robotic surgery company to earn $1.12 per share, minus some items, on $1.51 billion in sales. Earnings would slip almost 6% as sales rise close to 8%.

Wednesday:

ASML Holdings (ASML) and Lam Research (LRCX) will post their third-quarter results on Wednesday. Both semiconductor equipment suppliers are facing headwinds from U.S. export restrictions with China and chipmakers cutting capital expenditures amid a downturn in chip demand.

Abbott Laboratories (ABT) will report its third-quarter earnings before the stock market opens on Wednesday. Analysts call for the health care giant to earn an adjusted 95 cents a share on $9.64 billion in sales. Those measures would fall a respective 32% and 12%.

Alcoa (AA) is set to report Q3 earnings after Wednesday’s close. Analysts see EPS plunging 95% to 11 cents as revenue falls 4.8% to $2.96 billion. Alcoa stock is about 60% off its March high.

Steel Dynamics (STLD) announces third-quarter earnings after the market closes Wednesday. The steelmaker’s earnings are expected to increase 3% to $5.12 per share. Revenue is predicted to edge up 8% to $5.5 billion.

Winnebago Industries (WGO) reports fourth-quarter earnings before the stock market opens Wednesday. EPS is expected to grow 7% to $2.76. Sales are forecast to grow 10% to $1.1 billion for the RV and motor home manufacturer.

Thursday:

AT&T (T) reports third-quarter earnings early Oct. 20. Analysts predict that AT&T earnings will fall 7% to 61 cents a share. AT&T revenue is expected to drop 25% to $29.8 billion owing to the spinoff of WarnerMedia. Analysts expect earnings before interest, taxes, depreciation and amortization, or EBITDA, to come in at $10.47 billion. AT&T is expected to add 604,000 postpaid phone subscribers, down from 928,000 a year earlier.

The beleaguered social media company Snap (SNAP) reports third-quarter results late Thursday. Snap stock is down 76% this year, due to a slowdown in digital advertising. Analysts expect a loss of 24 cents, on revenue of $1.1 billion, up 12%. In late August, Snap announced plans to slash 20% of its workforce.

Asset manager Blackstone (BX) reports earnings Thursday morning. Earnings are seen sliding 23% to 98 cents per share on a 22% drop in revenue.

Philip Morris (PM) reports third quarter results early Thursday. The New York-based tobacco producer’s earnings are expected to shrivel 14% to $1.35 per share while sales decline 10.7% to $7.25 billion.

Freeport-McMoRan (FCX) is due to report Q3 results before Thursday’s open. The copper major is seen posting a 66% drop in EPS to 30 cents as revenue falls 18% to $4.99 billion amid lower prices for the metal. FCX stock is 46% off its 52-week high.

Friday:

Verizon Communications (VZ) reports third-quarter earnings early Oct. 21. The telecom services provider lowered 2022 EPS guidance in July. For the September quarter, analysts predict Verizon earnings of $1.29 per share, down 8% from a year earlier. Revenue is expected to rise 2.7% to $33.8 billion. Verizon is expected to add 32,000 wireless postpaid phone subscribers, down from 429,000 a year earlier.

Schlumberger (SLB) reports third-quarter earnings before the stock market opens. The oil field service giant is expected to report earnings of 55 cents per share, a 53% increase year over year. Analysts expect sales to jump 22% to $7.1 billion in Q3.

HCA Healthcare (HCA) Q3 earnings are due before Friday’s open. EPS for the hospital operator is seen sliding 15% to $3.88 as revenue dips 2% to $15 billion. HCA stock tanked on its Q1 earnings and outlook, but its relative strength line is at its highest point since April.

Simply Good Foods (SMPL) reports early Friday, and should deliver a 3% EPS decline to 28 cents on a 0.5% sales gain to $261.2 million.

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