It's a new year and its been a few weeks since our last U.S. Market Movers update... In the past few weeks, we've seen numerous big movers, significant technical events, earnings and notable corporate news! This article covers a brief rundown of this week's top U.S. Market pivotal movement written by our North American Research Desk, Gary Christie.
The S&P 500 broke above its 61.8% level.
Looking at a daily chart, the S&P500 broke above its 61.8% fibonacci retracement level from the most recent swing low of 2345 and December high of around 2805 which also corresponds to the 50-day moving average around 2630. We anticipate further upside towards 2715 and 2816.5 in extension. Our stop-loss has been raised to 2570 which is right on the 50% Fibonacci level.
On a longer time horizon (weekly chart), the SPX remains bearish with a stop-loss set at 2715. The 20-week moving average formed a bearish cross after crossing below the 50-week MA. Prices have not yet retraced 50% from the record high and 2018 low in December. Caution: We may break above our stop-loss very soon. A break above the 20-week moving average would serve as a warning signal.
The percentage of stocks in the S&P 500 trading above their 200-day moving average closed the week at 36%. Next resistance is set at the 50% level. The percentage of stocks in the S&P 500 trading above their 50-day moving average closed the week higher at 71%.
The VIX failed to break above its 50-day moving average and continued to fall. It is now trading near 17.4, which continues to play positively for the U.S. indices.
The S&P 500 improved by 1.09% last week. On the economic data front, On the economic data front, initial jobless claims decreased to 199k in week ended January 19th (estimated 218k) from 212k in the previous week. MBA mortgage applications decreased by 2.7% in week ended January 18th from a rise of 13.5% in the previous week. In other news, existing home sales fell to 4.99M units in December (estimated 5.24M) from 5.32M units in November. Also, the Bloomberg consumer comfort index declined to 57.4 in week ended January 20th from 58.1 a week earlier while the University of Michigan sentiment index fell to 90.7 in a preliminary estimate in January (expected 96.8) compared to 98.3 a month earlier. Finally, the Leading index decreased by 0.1% in December, in-line with forecasts, compared to an improvement of 0.2% in November.
We had some big movers last week. Here's a look at the 8 most notable:
Lam Research(LRCX +16.74% WoW to $165.49) announced 2Q adj. EPS of $3.87 (estimated $3.66) vs. $4.34 a year ago on revenue of $2.52B (forecasted $2.5B) compared to $2.58B in the previous year. The Co sees 3Q adj. EPS in a range of $3.2 - $3.6 (expected $3.35) and expects revenue to reach $2.25B - $2.55B (forecasted $2.46B). Finally, the Co authorized a new $5B share buyback program.
Texas Instruments(TXN +7.04% WoW to $104.41) reported 4Q diluted EPS of $1.27 (estimated $1.23) vs. $0.34 a year ago on revenue of $3.72B (forecasted $3.75B) from $3.75B in the prior year. Net income jumped by 260% YoY to $1.24B. The Co sees 1Q EPS in a range of $1.03 - $1.21 (expected $1.21) and expects revenue to reach $3.34B - $3.62B (estimated $3.6).
Xilinx (XLNX +19.66% WoW to $110.37) unveiled 3Q adj. EPS of $0.92 vs. $0.65 last year on net revenue of $800M (estimated $770.5M) from $599M in the previous year. Net income surged to $239M vs. net loss of $12M in 3Q2018. The Co sees 4Q revenue in a range of $815M-$835M. Besides, the Co reached a new 52w high.
McCormick(MKC -13.61% WoW to $121.36) announced 4Q adj. EPS of $1.67 (estimated $1.7) vs. $1.57 a year ago on net sales of $1.5B (forecasted $1.55B) from $1.49B in the prior year. Gross profit margin on an adjusted basis reached 45.5%, missing expectations of 46.4%, vs. 45.8% in the same period last year. The Co sees 2019 sales up 1-3% and adj. EPS in a the range of $5.17-$5.27 (estimated $5.39).
PGE Corp(PCG +85.06% WoW to $11.77) surged as California investigators found that the Co's equipment wasn't responsible for the Tubbs fire which was the 2nd most destructive wildfire in state history, according to Bloomberg. In other news, the Co objected to extraordinary safety precautions proposed by a federal judge to prevent the utility from causing wildfires in California in 2019 while estimating the cost of full compliance with a probation order might be $75-150B and the Co does not have the ability to raise those funds.
IBM(IBM +9.64% WoW to $133.97) reported 4Q operating adj. EPS down 5% YoY to $4.87 (estimated $4.82) on revenue down 3% YoY to $21.8B (forecasted $21.71B). The Co sees 2019 operating EPS of at least $13.9 (expected $13.8) and sees 2019 free cash flow of about $12B.
Waters (WAT +13.25% WoW to $229.16) reported 4Q adj. EPS of $2.87 (estimated $2.64) vs. $2.51 a year earlier on net sales of $715M (forecasted $703M) from $687M in the previous year. The Co sees 1Q adj. EPS in a range of $1.65 - $1.75 (expected $1.74) and expects FY adj. EPS in a range of $9.2-$9.45 (estimated $9.19). Finally, the Co authorized a new $4B share buyback program. Besides, the Co reached a new 52w high.
eBay(EBAY +10.99% WoW to $33.72) gained traction as Elliott Management, which manages funds that own more than a 4% stake in the Co, sent a letter to eBay to outline "a significant value-creation opportunity at eBay" which can push the stock towards $55-$63 per share.
Starbucks (SBUX +4.37% WoW to $67.09) released 1Q adjusted EPS of $0.75 (estimated $0.65) vs $0.65 a year earlier on net revenue of $6.63B (estimated $6.49B) from $6.07B last year. Comparable sales growth was 4% (estimated +3%) compared to +2% last year. Net new store openings in Americas were 807. The Co raised full-year adj EPS to $2.68-2.73 from $2.61-2.66 previously (estimated $2.65) and sees full-year global comparable sales growth at 3%-4%.
Western Digital (WDC +18.34% WoW to $43.16) unveiled 2Q adjusted EPS of $1.45 (estimated $1.50) vs $3.95 a year ago on net revenue of $4.23B (estimated $4.25B) from $5.34B last year. Net loss improved to $487M vs. $823M in 2Q2018. The Co sees 3Q revenue reaching $3.6B-$3.8B (forecasted $3.88B) and expects adj. EPS in a range of $0.4-$0.6 (expected $1.01). Finally, the Co expects revenue to improve in the second half of 2019.
Earnings preview this week:
VZ US: On Tuesday, Verizon Communications is expected to report 4Q EPS of $1.09 vs. $0.86 a year ago on revenue of $34.4B compared to $34B in the previous year. In other news, the Co is 2 years ahead of schedule on 5G and expects "meaningful" 5G revenue by 2020, according to its CEO. Technically speaking, the RSI is above its neutrality area at 50 while the MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (respectively at 56.62 and 57.6). We expect to reach $61.9 with a stop-loss at $55.2.
AAPL US: On same day in the after-hours, Apple is likely to announce 1Q EPS of $4.17 vs. $3.89 last year on lower revenue of $84B from $88.3B a year earlier. According to Nikkei, 50,000 contract workers have been let go since October at Foxconn's most important iPhone factory at Zhengzhou, China. Looking at the chart, the RSI is mixed to bullish. Prices broke above the 20-day moving average after breaking above a short-term bearish trend channel. As long as prices remain above $141.75, we anticipate the stock to reach $175.
MCD US: On Wednesday, McDonald's is anticipated to post 4Q EPS of $1.88 vs. $1.71 a year ago on revenue of $5.2B compared to $5.3B in the prior year. In other news, the Co was raised to "overweight" from "equal-weight" at Morgan Stanley. From a technical 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 above its 20 and 50 day MA (respectively at 180.02 and 181.94). Finally, McDonald's has crossed above its upper daily Bollinger band (187.36). McDonald's is currently trading near its 52 week high reached at 190.88 on 29/11/18. We anticipate prices to continue higher towards $198.8 with a stop-loss at $181.1.
FB US: On same day, Facebook is awaited to unveil 4Q EPS of $2.19 vs. $2.21 last year on higher revenue of $16.4B from $13B in the previous year. Also, US regulators are about to impose a record-setting fine against the Co for violating a legally-binding agreement with the government to protect the privacy of its users' personal data, according to the Washington Post. From a chartist point of view, the RSI is above 50 the MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is above its 20 and 50 day MA (respectively at 141.45 and 139.53). We are confident the stock can trade above $133.5 towards $167.4.