Stock Market Investing Action Plan: Netflix, Schlumberger Earnings; Will Oil Top $80?

The stock market showed modest signs of rising strength as the young uptrend gained a dash of momentum. Industrials and materials stocks continue to gather strength, and oil prices are back near the upper end of their recent range, keeping energy investors on their toes. Earnings season is officially underway, and the mood so far seems generally positive. Netflix (NFLX), SLB (SLB) and New Oriental Education (EDU) are among the names to watch in the coming week.

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Stocks To Watch: Stocks Flashing Buy Signals

With the stock market rally broadening and gaining momentum, a diverse array of stocks began to flash buy signals. Many are already extended. But some, including Wendy’s (WEN), Exxon Mobil (XOM), Quanta Services (PWR), Celsius Holdings (CELH) and Insulet (PODD), are actionable from early entries and near key moving averages. In addition, Exxon is less than 2% below a flat-base buy point. Wendy’s is rebounding amid a six-week rally in restaurant stocks that has launched names like Denny’s (DENN) and Shake Shack (SHAK) to huge gains. Find more detailed information in Investors.com’s IBD Stock Of The Day column, where Wendy’s, Insulet and Celsius were all selections in the past week.

Economic calendar:

The Producer Price Index, out Wednesday at 8:30 a.m. ET, should provide more good news on the inflation front, with December wholesale prices expected to be flat vs. the prior month. The Retail sales report for December, also due at 8:30 on Wednesday, is forecast to show a second-straight negative reading amid weak auto sales. The Federal Reserve’s Beige Book anecdotal report on the economy is out Wednesday at 2 p.m. Initial jobless claims, out Thursday at 8:30 a.m., have been remarkably low in recent weeks, a trend that probably doesn’t provide comfort to Fed policymakers.

CPI Inflation Rate Slides As Service Prices Show Progress; S&P 500 Rises

A batch of housing data also is due. The NAHB Housing Market Index is out Wednesday at 10 a.m. Housing starts and building permits are due on Thursday at 8:30 a.m., with existing home sales set for Friday at 10 a.m. Weekly oil supply data will also be closely watched on Wednesday, as oil prices test the $80 high end of their recent range. A break above that level could signal a market shift.  

Stock Market Perspective: Uptrend Gets A Fighting Chance

The big benchmarks turned in their strongest week since November, giving the market’s fledgling uptrend a fighting chance. That left the Dow industrials just 2% from retaking the 35,000 mark, the S&P 500 less than 1% below 4,000 and the Nasdaq composite once again attempting to hold support above its 50-day moving average. China’s vital markets continued their rebound, giving the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) a 9.8% gain so far in January, while the KraneShares CSI China Internet ETF (KWEB) is up 16.6% as it tracks toward its third steep monthly advance. China’s stock markets may see some weakening next week, as investors draw cash ahead of the Lunar New Year Holiday, which starts Jan. 21 and runs through the following week.

Dow Earnings: Blue Chip Q4 Ramps Up

JPMorgan (JPM) and UnitedHealth Group (UNH) set the reporting season in motion for blue chips on Friday. The slow roll continues in the coming week, with only Goldman Sachs (GS) and Procter & Gamble (PG) reporting, on Tuesday and Thursday. Goldman earnings are expected to fall by half, while net interest income rises 6%. Procter & Gamble is expected to see modest slips in earnings and sales. The Dow season really picks up the following week, when at least 10 industrials are due to report.   

Netflix Earnings Seen Slipping

Netflix (NFLX) will reveal its fourth-quarter results late Thursday. Analysts expect the internet television network to add 4.6 million paid subscribers in the December quarter for a total of 227.6 million worldwide. Wall Street is modeling Netflix to earn 58 cents a share on revenue of $7.84 billion. That would translate to a year-over-year decline of 56% in earnings and an increase of 2% in sales. Hit programming for Netflix during the period included “Wednesday,” “Harry & Meghan,” “Dahmer” and “Glass Onion.”

China Stocks: Big Educators To Report

China’s big private education operators are due to report with New Oriental Education & Technology (EDU) due out Tuesday and TAL Education (TAL) set for a Thursday release. American Depositary Receipts for both companies have rebounded more than 400% from a March low. TAL is consolidating. EDU is breaking to new highs following a rebound from support. Quarterly results are expected to be weak, but the outlooks will be scoured for signs that China’s easing from a zero-Covid stance could be opening doors for students, families and consumers.  

Ear To The Ground: A Contrarian’s Market View

The U.S. economy has a 60% chance of a soft landing, according to Yardeni Research. That’s a contrarian view. Yardeni’s surveys show the consensus scenario among investment strategists is for stock prices to fall through the first half of the year, maybe to a new bear-market low by late June. That would set the stage for a strong rally in H2, while leaving the stock market indexes with relatively minor full-year gains. Yardeni concludes that giving weight to overseas markets might not be a bad strategy for the first half of the year, especially Europe, which so far appears to be dodging a recession.

Stock Market Earnings Briefs

Tuesday

Morgan Stanley (MS) earnings are expected to drop 39% to $1.27 per share for its fourth quarter results Tuesday morning. Analysts predict revenue will slide 13% to $12.54 billion, which would mark the fourth straight decline. The bank’s earnings have fallen for the past three quarters.

Late Tuesday, United Airlines (UAL) should swing to EPS of $2.11 on a 49% revenue gain. That would mark the sixth straight quarter of slowing sales growth.

Wednesday

Charles Schwab (SCHW) is set to report Q4 results before Wednesday’s open. Analysts expect EPS to rise 27% to $1.09, helped by a stock market rebound. Revenue is seen up 18% to $5.57 billion. Since breaking out in late October, SCHW stock has found support at its 50-day line and rallied from there. That setup might repeat itself.

J.B. Hunt Transport Services (JBHT) reports fourth-quarter results early Wednesday. The Street expects earnings to increase 8% to $2.46 per share. This would mark a considerable slowdown compared to the average growth of 51% over the last three quarters. Revenue is forecast to advance 10% to $3.83 billion. Again, this would mark a departure from an average sales increase of 29% over the last three quarters in 2022.

Kinder Morgan (KMI) reports fourth-quarter earnings after the stock market closes Wednesday. Analysts expect the energy infrastructure giant’s EPS to advance 11% to 30 cents. This would be the fifth consecutive quarterly earnings increase. The company’s EPS peaked at 60 cents in Q1 2021. Wall Street forecasts revenue jumping 10% to $1.2 billion in Q4. That would be the highest sales number since Q1 2022 and third highest since Q1 2021.

Alcoa (AA) reports Q4 results after Wednesday’s close. The aluminum giant is seen losing 69 cents a share vs. a year-ago profit of $2.50 amid higher costs and a 20% drop in sales. Still, AA stock has climbed above its 200-day line for the first time since last June.

Friday

SLB (SLB), formerly known as Schlumberger, reports Q4 earnings before the stock market opens Friday. The oil field service firm is expected to see its EPS increase 66% to 68 cents. This is in line with the average growth of 67% over the last three quarters. Analysts forecast revenue growing 25% to $7.78 billion, which would be the highest quarterly sales number since Q4 2019.

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