Credit: Shutterstock photoWorries about a global economic slowdown continues to fuel what I can only call “panic selling.” Not wanting to be the last few market participants holding the proverbial bag, investors are racing to sell equities before prices bottom out.
The result? All the three major market indexes, for the first time since March 2016, are now in correction territory — defined as falling 20% below their peak price. This time the focus was on economic data from China and Europe, which arrived Friday weaker than expected, sparking yet another selloff. And if you’ve been following the pattern over the past several weeks, huge Friday selloffs have become the norm.
So far this month, the Dow Jones Industrial Average has lost 5.6%, while the S&P 500 and Nasdaq Composite are down a respective 5.8% and 5.7%. My glass-half-full view suggests buying on the dips, given the upcoming meeting of the Federal Reserve, which will be held December 18-19 to determine the course of interest rates. Experts are calling for an increase of 25 basis points, putting the benchmark interest rate in a range of 2.25% and 2.50%.
The market has already priced in that assumption. What is not priced in, however, is what the Fed will do next year. The overwhelming consensus of economists is that the Fed will signal two rate hikes for 2019. Stocks will rebound strongly if, upon dissecting the Fed’s words, there is any indication that two rate hikes (or fewer) are in the cards for 2019. And given the recent market volatility, my money is on that precise scenario playing out. This, too, will benefit the following four stocks due to report earnings this week.
Oracle (ORCL) - Reports after the close, Monday, December 17
Wall Street expects Oracle to earn 78 cents per share on revenue of $9.53 billion. This compares to the year-ago quarter when earnings came to 70 cents per share on revenue of $9.63 billion.
What to Watch: The cloud market continues to accelerate, as evidenced by the strong earnings beats from the likes of Adobe (ADBE) and Salesforce (CRM), but can Oracle do enough to convince investors it can finally stake a legitimate claim to the sustained growth of the market. Oracle shares have fallen some 4% over the past three months. The company is in the third year of this multi-year transition to a Cloud subscription-based model. On Monday, aside from the top- and bottom-line results, the major topic will be the progress of the company’s ongoing transition towards a cloud-based platform.
FedEx (FDX) - Reports after the close, Tuesday, December 18
Wall Street expects FedEx to earn $3.96 per share on revenue of $17.76 billion. This compares to the year-ago quarter when earnings came to $3.18 per share on revenue of $16.31 billion.
What to Watch: Recent mentions of Amazon (AMZN) entering the delivery space to compete with both FedEx and UPS (UPS) has spooked investors, pressuring FedEx shares, despite the company beating estimates strongly in the previous two quarters. Now would be a good time to buy the stock. The second quarter results should continue to demonstrate not only the strength of the company’s extensive delivery network, but also FedEx’s rising e-commerce business. Combined with the company’s ongoing cost management initiatives, long-term profitability is the expectation at FedEx.
Micron (MU) - Reports after the close, Tuesday, December 18
Wall Street expects Micron to earn $2.94 per share on revenue of $8.03 billion. This compares to the year-ago quarter when earnings came to $2.45 per share on revenue of $6.80 billion.
What to Watch: Micron shares have been sliced in half since the stock broke north of $64 during he summer. Indeed, much of the decline has been due to pressure on the semiconductor stocks in general. But there is concern that the DRAM pricing cycle, which in years past hurt Micron’s revenue due to oversupply, is once again a legitimate threat to the business. Micron management, which has steered the company towards beaten twelve straight earnings beats, has downplayed the issue, while expressing confidence the company can overcome the cycle. Still, on Thursday the company must give investors reason to fully believe that the cyclical nature of the memory chip business is gone for good.
BlackBerry (BB) - Reports before the open, Thursday, December 20
Wall Street expects the company to breakeven at 0 cent per share on revenue of $214.45 million. This compares to the year-ago quarter when earnings came to 3 cents per share on revenue of $235 million.
What to Watch: The prevailing question with BlackBerry is to what extent can the company grow revenue? The former smartphone maker, which has rebuilt itself into an enterprise security company, is still carving out its niche in the realm of software security services. While the transition has been slow and painful, profitability is now real and the rate of revenue declines have decelerated. But with the stock down roughly 20% so far in 2018, to get investors to believe in the long-term prospects of the company, BlackBerry must show it can get the top line growing again.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
