Stock Market Investing Action Plan: Nike Earnings, Tesla AI Day

Four days of steady selling on the stock market sent the Dow industrials below 30,000, and to their lowest level since Q3 2020. The Nasdaq and S&P 500 stopped short of key levels, setting up a crucial challenge heading into the final week of September. Tesla’s AI day and Nike earnings are both key events. And another round of inflation data wraps the week on Friday, making the final trading day of September a wildcard session.

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Stocks To Watch: Five Stocks For A Sickly Market

The stock market correction has intensified, with the major indexes at or near their June lows. It’s a time to be looking for relative strength, scouting out the next potential winners. Medical stocks, somewhat insulated from economic concerns, stand out. Eli Lilly (LLY), Vertex Pharmaceuticals (VRTX), Neurocrine Biosciences (NBIX), McKesson (MCK) and Humana (HUM) are all showing relative strength, though none are actionable right now. All have clear bases except for Humana, which recently topped a short consolidation before pulling back slightly.

Econ Calendar: Another Dose Of Inflation Data

Economic data in the coming week will feature an August update of the Federal Reserve’s favored inflation gauge, the personal consumption expenditures price index, out Friday at 8:30 a.m. ET. The core PCE price index, excluding food and energy, is expected to reaccelerate to a 4.8% annual gain. Hawkish projections released on Wednesday show the Fed’s key rate rising to 4.6% in 2023. The projections seem to indicate that rate cuts won’t be on the table until core PCE inflation falls to 3% or lower, which isn’t expected until 2024.

Federal Reserve Expects Key Rate To Peak At 4.6%; Dow Jones Slides

The PCE inflation figures are reported with the Commerce Department’s personal income and spending data, which will show how broad-based goods and services spending is proceeding in Q3 amid lower gas prices. At the moment, the Atlanta Fed’s GDPNow tracker indicates just a 0.3% growth rate for the U.S. economy in Q3.

On Thursday at 8:30, we’ll get the third update for Q2 GDP, which the government earlier estimated to have fallen 0.6%, after Q1’s 1.6% drop. With the housing sector in reverse, the economy is leaning more on business equipment investment. The durable goods orders report out Tuesday at 8:30 will show the latest trend.

Stock Market Perspective: Will The June Lows Hold?

The stock market’s correction deepened, with index losses of roughly 5%-6% the past week. The Dow Jones Industrial Average sank to the lowest level since November 2020. The Nasdaq and S&P 500 now test their June lows, where a reckoning of sorts could take place. A break below those levels would be another bearish sign for the stock market. The Innovator IBD 50 ETF, which tracks IBD’s signature index, undercut the 2020 lows and is at the lowest point since December 2016. The fund plunged more than 11% for the week as the energy stocks that had been holding up sold off en masse. Many broke below support levels or their bases became distorted with the latest wave of selling. To be sure, sell signals are appearing in multiple sectors. Several health care leaders that had held up also came under selling, leaving little worth a look. 

Blue Chips: Nike Earnings

Nike (NKE) stock is undercutting support and trading at its lowest levels since Q3 2020 as the company prepares to report fiscal first-quarter earnings Thursday afternoon. Analysts expect the sports apparel giant’s earnings to fall 20%. The revenue target is up slightly at $12.28 billion, vs. $12.25 billion a year ago. NKE has faced factory closures in China and Vietnam stemming from the coronavirus pandemic. In June’s Q4 report the company’s revenue from China dropped 19%. But Nike also made major strides in its digital and direct-to-consumer sales channels. Nike projected Q1 revenue will only be flat to slightly up, which is just below analyst targets. It expects fiscal 2023 revenue to rise in the low double digits. 

Stock Market Buybacks Declined In Q2, Sort Of

Apple (AAPL) and Google parent-Alphabet (GOOGL) led all U.S. companies in stock buybacks during the second quarter, though overall repurchases fell nearly 22% from the previous quarter, according to S&P Dow Jones Indices. Overall, S&P 500 buybacks in Q2 were $219.6 billion, down 21.8% from the first quarter’s record $281 billion. Information technology companies continued to lead the way in buybacks. Buybacks by financial companies fell 61% to $21.2 billion. Health Care buybacks decreased 58% to $17.2 billion. Compared to the year-earlier period, Q2 in 2021, buybacks rose 10%. Apple repurchased $24.56 billion of its own shares, down about 4% from a year earlier. Alphabet repurchased $15.19 billion of Google stock, up about 19% from a year earlier.

Tesla AI Day

Tesla‘s (TSLA) annual AI Day will showcase the global EV leader’s latest technology. The event will take place on Sept. 30, including live streams on the Tesla website and YouTube. Optimus, the humanoid robot, is likely to headline this year’s event. Also known as the Tesla bot, Optimus eliminates “dangerous, repetitive and boring tasks,” Tesla CEO Elon Musk has claimed. It could revolutionize factories and the service industry. Investors could also learn more about Tesla’s progress on self-driving technology, the Cybertruck and the Supercharger V4. 

Gauging Analysts’ Q4 Optimism

Almost 56% of the more than 10,000 stock ratings currently on S&P 500 stocks are buy ratings, according to FactSet. Less than 6% are sell ratings, and about 39% are hold ratings. The percentage of buy ratings is below the 10-year average, and down from a high of 57.4% in February. Prior to that peak, the last time the month-end percent of buy ratings topped 55% was in September 2011. Ratings are most optimistic (more than 62% buys) on energy, information technology and real estate sectors. Consumer staples and utilities have the lowest percentages of buy ratings.

Stock Market Earnings

Tuesday:

Jabil (JBL) will release its fiscal fourth-quarter results early Tuesday. Analysts expect the contract electronics manufacturer to earn $2.15 a share, up 49% year over year, on sales of $8.39 billion, up 13%.

Cal-Maine Foods (CALM) reports first-quarter results Tuesday after the stock market closes. Wall Street forecasts earnings increasing from a loss of 37 cents per share last year to $2.55 per share in Q1 2023. Sales are expected to grow 86% to $617 million for the national egg distributor.

Wednesday: 

Thor Industries (THO) announces fourth-quarter earnings Wednesday morning. Analysts predict EPS will drop 7% to $3.82 per share while revenue is expected to grow 3% to $3.7 billion. Wall Street forecasts the RV camper and emergency vehicle manufacturer will earn $19.35 per share on sales of $16.2 billion for the full year. 

Cintas (CTAS) reports first-quarter 2023 financials Wednesday before stock market action. Earnings are predicted to edge up 0.6% to $3.13 per share for the provider of corporate uniforms and business services. Revenue is projected to grow 9% to $2.1 billion. Cintas is coming off record full year revenue in 2022.

Early Wednesday, Paychex (PAYX) should see a 9% EPS gain to 97 cents on 9% revenue growth to $1.182 billion.

Jefferies Financial (JEF) is basing ahead of its Thursday afternoon earnings report. Wall Street predicts adjusted earnings will plummet 38% to 93 cents per share. And revenue is expected to drop nearly 30% to $1.36 billion. 

Thursday:

Micron Technology (MU) will post its fiscal fourth-quarter results late Thursday. Wall Street is forecasting the memory-chip maker to earn $1.41 a share, down 42% year over year, on sales of $6.82 billion, down 18%.

Early Thursday, recent meme stock Bed Bath & Beyond (BBBY) is likely to lose $1.80 a share vs. EPS of four cents a year ago. Revenue is seen plunging 27% to $1.447 billion.

Also early Thursday, used-car retailer CarMax (KMX) is expected to reveal a 17% EPS decline to $1.43 despite an 8% sales gain to $8.614 billion.

Worthington Industries (WOR) reports first-quarter 2023 earnings before the stock market opens Thursday. Analysts expect the industrial manufacturing company to earn $1.63 per share, a 34% decrease year over year. Wall Street forecasts revenue growing 11% to $1.3 billion.

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