Stock Market Action Plan: Inflation, Disney Earnings, EV Makers And The Metaverse

The stock market’s major indexes dug deeper into their correction during the first week of May, leaving the Dow industrials with six straight weekly losses and the S&P 500 and Nasdaq composite with five losses each. The 10-year Treasury yield spiked to a 42-month high. U.S. oil prices finished the week just below $110 a barrel, up 53% for the year. The coming week holds earnings from Disney and a couple of top EV makers, as well as some important inflation gauges and the IBD/TIPP Economic Optimism Index.




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Stocks To Watch: Five Lead In Resilient Sectors

As the stock market digs deeper into its correction, investors should be extremely cautious about making any new buys. However, it is an important time to watch stocks and sectors that are holding up, such as Northrop Grumman (NOC), Chevron (CVX), Livent (LTHM), Mosaic (MOS) and Merck (MRK). Northrop and Chevron are finding support near their 50-day lines in shallow bases. Livent spiked last week on big earnings and guidance, topping a short-term high. Ideally the lithium play would form a handle here. Fertilizer heavyweight Mosaic has pulled back to its 50-day after a huge run. Merck is just below a buy point in a five-month cup-with-handle base.

Econ Calendar: Inflation Gauges, Consumer Sentiment

Are we finally past the long-awaited peak for the inflation rate? Many economists think so, and we’ll get confirmation — or more heartbreak — with the release of April’s consumer price index on Wednesday at 8:30 a.m. ET. The confidence mainly reflects the point of comparison, because a surge in used-car prices that started in April 2021 will no longer be part of the 12-month change. But even if the peak is past, the monthly change and April’s producer price index, out on Thursday morning, will shape the near-term outlook for how fast inflation recedes. Also of note, the IBD/TIPP Economic Optimism Index, an early-month read on consumer confidence, is out Tuesday at 10 a.m. ET. With gas prices higher and stock prices lower, we could be in for a relapse after April’s bounce.


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EV Makers: Rivian, Li Auto, Lightning Report

After the stock market close on Wednesday, Rivian (RIVN) is likely to lose $1.41 per share on revenue of $132.7 million. Production outlook will be key for the Amazon (AMZN) and Ford (F) backed EV startup. Rivian’s looking to produce $25,000 vehicles this year but, like all automakers, faces significant supply-chain issues. Its lineup includes the R1T pickup truck and R1S SUV. Early Tuesday, China startup Li Auto (LI) is likely to lose 7 cents a share vs. a loss of 6 cents a year ago. Revenue is seen vaulting 173% to $1.49 billion. Investors will look for updates on supply disruptions after Covid lockdowns gutted April EV sales. Li also delayed the April debut of the L9 SUV, a new EV and the second in its lineup. Early Friday, Lightning e-Motors (ZEV) is likely to narrow losses to 24 cents per share from 86 cents a year ago on nominal revenue of $5.5 million.

Streaming Media: Disney Squares Off Vs. Netflix

With the Dow’s earnings season nearly done, Walt Disney (DIS) heads up a strong list of media names preparing to report. Subscriber stats for the 29-month-old Disney+ streaming service will be in sharp focus, after the weak Q1 showing by Netflix (NFLX). Other media leaders due to report include Sony Group (SONY), Fox (FOXA) and Liberty Global (LBTYA).

Video Games: Metaverse Stocks To Report

Two video game companies hoping to play a major role in the coming metaverse will report March-quarter results late Tuesday. Those firms, Roblox (RBLX) and Unity Software (U), have tools and services for creating virtual worlds. Both companies are unprofitable and are in investment mode. The week ahead also will see earnings reports from video game platforms Nintendo (NTDOY) and Sony (SONY), and game publishers Electronic Arts (EA), Playtika (PLTK) and SciPlay (SCPL).

Restaurants: Wendy’s, Krispy Kreme earnings due 

Fast-food chain Wendy’s (WEN), drive-thru coffee chain Dutch Bros (BROS) and doughnut maker Krispy Kreme (DNUT) report first-quarter results on Wednesday. Wall Street expects Wendy’s earnings per share to fall 10% to 18 cents, as revenue increases 8% to $497 million. Krispy Kreme’s earnings were also expected to fall, dropping 46% to seven cents per share, with sales up 15% to $369 million. Dutch Bros, which began trading in September, was seen earning a penny per share on revenue of $145.5 million. The chains report after McDonald’s (MCD) and Starbucks (SBUX) reported little customer resistance to rising prices overall, although McDonald’s noted a slight “trade-down” in some areas.   

 Marijuana Stocks: Cronos, Aurora Report

Canadian marijuana producers Cronos Group (CRON) and Aurora Cannabis (ACB) report earnings on Tuesday and Thursday, respectively, as the industry continues to struggle with losses, layoffs, competition and sinking prices. Analysts expect Cronos to lose nine cents per share, as sales roughly double to $25.5 million. Aurora was seen losing 17 cents per share, with sales down 8% to $42.1 million. Marijuana stocks overall have been beaten down, after hopes dimmed for legalization in the U.S.

Non-U.S. Big Pharma: Bayer, Takeda

Germany’s Bayer (BAYRY) and Japan’s Takeda Pharmaceutical (TAK), on an acquisition spree that included Shire in 2019 and biotechs Maverick and GammaDelta over the past year, will report recent earnings on Tuesday and Wednesday, respectively. Analysts expect Bayer’s sales to be just about flat at $14.96 billion. Adjusted profit is expected to climb by two pennies to 80 cents per share. Takeda is expected to gain 6 cents a share on $6.94 billion in sales. Earnings would tumble 90% as sales fall 1.5%.

Food Producers: Poultry Prices In Focus

Poultry-production giant Tyson Foods (TSN) reports fiscal second quarter earnings on Monday. Wall Street expects Tyson to earn $1.86 per share, a 39% jump, with sales climbing 14% to $12.844 billion. The company reports as an avian influenza outbreak tears through U.S. commercial flocks, and as climate pressures and Russia’s invasion of Ukraine ratchet fertilizer and crop costs higher and make it more expensive to feed and manage livestock. All are effects that have spilled over into grocery bills. Other issues, such as difficulty staffing facilities, have also constrained production. Darling Ingredients (DAR), a company that converts animal byproducts and used oil into fat, grease and other ingredients, reports Tuesday.

Energy Industry: Occidental, Suncor, Petrobras Report

As oil markets rage, Occidental Petroleum (OXY) is the lead producer due to report. Results are less a question of earnings than of costs and spending. How much has oil field inflation driven up the cost of production? As the world clamors for oil, how much will producers need to increase spending simply to keep pace with rising costs of services, labor and materials? Canadian tar sands producer Suncor Energy (SU) and Brazil’s state-backed Petrobras (PBR) also report, along with oil transport names including Teekay Tankers (TNK) and SFL (SFL).

Stock Market Earnings Briefs:

XPO Logistics (XPO), a trucking company, reports first-quarter earnings on Monday. Wall Street expects EPS of 93 cents, up 9%, but sales are expected to drop 33% to $3.221 billion

After the stock market close on Monday, Trex (TREX) is likely to post a 28% EPS gain to 54 cents on a 33% revenue jump to $327 million.

Celsius Holdings (CELH), an energy-drink maker, reports first-quarter earnings on Tuesday. Wall Street expects earnings per share of three cents, up from a penny a year ago, as sales climb 129% to $114.3 million.

Early Tuesday, Planet Fitness (PLNT) is likely to see a 172% EPS rebound to 27 cents on a 70% sales bounce to $190 million.

Grocery Outlet (GO), a discount grocery retailer, reports first-quarter earnings on Tuesday. Analysts expect the company to earn 19 cents per share, down 17%, on sales of $810 million, up 8%.

Hyatt (H), the hotel chain, reports first-quarter earnings Tuesday. Wall Street expects a 38-cent per-share loss, narrower than a year ago, on revenue of $1.105 billion, a 152% gain.

Choice Hotels (CHH), a hotel franchiser, reports first-quarter earnings on Tuesday. EPS was forecast to rise 56% to 89 cents, as revenue increases 39% to $255 million.

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