What direction will the market take to close out the year? And when assessing the level the conviction held by the bulls and the bears, who will blink first? These questions don’t have easy answers given the number of variables are that still at play, including vaccine distribution and the next round of Covid-19 relief which is still yet to pass Congress.
When putting all of this together, it was another see-saw battle between good news and bad news on Friday as the major benchmarks ended the trading session on a downbeat note, capping a week marked by stagnant progress toward the many issues the market wants a resolution to. And while there are still reasons to be optimistic about 2021, namely the availability of a vaccine, the near-term implications of rising cases and business closures would suggest that stock valuations are too stretched, even as indexes hit new highs earlier in the week.
On Friday the Dow Jones Industrial Average added 47.11 points, up 0.16% to the session at 30,046.37. The blue chip index was powered by shares of Walt Disney (DIS), which surged 13.59% to an all-time high after the media and entertainment giant rolled out a streaming strategy and boosted its subscriber forecast for Disney+. The S&P 500 index, meanwhile, gave up 4.65 points or 0.13% to close at 3,663.46, while the tech-heavy Nasdaq Composite Index lost 27.94 points, 0.2%, to close at 12,377.87. The Nasdaq was pressured by a 2.7% decline in Tesla (TSLA) which received a downgrade ahead of the company being added to the S&P 500 index.
For the week, all three major benchmarks posted declines, with the Dow losing 0.6%, the S&P 500 index dropping by 1%, while the Nasdaq lost 0.7%. Coronavirus headlines are likely to keep a ceiling on stocks in the near term, especially in light of downbeat economic data on Thursday that showed an increase in jobless benefit claims. This now puts increase pressure on Congress to finally shake hands on the proposed $908 billion pandemic relief package. The amount of money that state and local governments are to receive in the relief package is where the difference lies, causing the gridlock.
Until an agreement is reached, the market will likely trade in a tight range. That can either be good news or bad news, depending on where investors believe the market should be. For now, here are this week’s stocks to keep an eye on.
Accenture (ACN) – Reports before the open, Thursday, Dec. 17
Wall Street expects Accenture to earn $2.05 per share on revenue of $11.36 billion. This compares to the year-ago quarter when earnings came to $2.09 per share on revenue of $11.36 billion.
What to watch: Compared to other tech/software stocks, Accenture shares haven’s participated in the robust market rally we have enjoyed since the March bottom, but he stock has held its own pretty well despite a muted enterprise IT spending environment. Rising 17.5% in six months and up 17% year to date, the IT consulting company has traded inline with Technology Select Sector SPDR ETF (XLK) while outperforming the S&P 500 index in both spans. The question is, with the stock already up some 20% off its October low, presumably in part due to its buyback strategy, can Accenture be relied upon to deliver in 2021 in a meaningful way absent a strong recovery in enterprise IT spending?
FedEx (FDX) – Reports after the close, Thursday, Dec. 17
Wall Street expects FedEx to earn $3.93 per share on revenue of $19.39 billion. This compares to the year-ago quarter when earnings came to $2.51 per share on revenue of $17.32 billion.
What to watch: What can FedEx do for an encore? The stock, which is up 110% in six months and up 92% year to date, is trading near 52-week highs buoyed by stronger-than-expected business activity, particularly in its domestic parcel capacity. Citing confidence that FDX will beat consensus estimates in its earnings report, analysts at UBS recently upgraded the price target on the stock from $320 to a Street-high mark of $380. “We expect FDX to deliver upside 2Q earnings and we are raising our estimate from $3.82/share to $4.20/share,” noted the analysts. “Asia airfreight rates have risen sequentially which provides support for FDX’s Express performance while we believe the continued strength in e-commerce provides a strong revenue backdrop for ground.” On Thursday investors will want to hear that same level of optimism, namely about profitability improvements within FedEx’s ground segment.
Nike (NKE) – Reports after the close, Friday, Dec. 18
Wall Street expects Nike to earn 61 cents per share on revenue of $10.55 billion. This compares to the year-ago quarter when earnings came to 70 cents per share on revenue of $10.33 billion.
What to watch: Shares of Nike remains one of the better-performing names within the retail sector, rising 35% over the past six months, despite the economic devastation the pandemic has inflicted upon consumers. Some might suggest that Nike shares have now run too far ahead of the company’s fundamentals. At the same time, however, driven by the pandemic, Nike is benefiting from the fact that consumers across the globe have developed an increased focus on health and wellness. As such, known for its strong brand name and innovation, Wall Street sees Nike strongly positioned to capitalize on increased demand for its products like shoes and apparel. The company will need to affirm that confidence with strong revenue forecasts, particularly during the holiday quarter.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.