- U.S. inflation data, retail sales in focus.
- Oracle is a buy with solid earnings beat, guidance on deck.
- Apple is a sell after iPhone event amid China-related headwinds.
- Looking for more actionable trade ideas to navigate the current market volatility? Members of InvestingPro get exclusive ideas and guidance to navigate any climate.
Wall Street's main indices ended a tad higher on Friday but still finished the week with losses amid renewed worries over inflation and uncertainty about the future path of the Federal Reserve’s interest rates.
For the week, the blue-chip Dow Jones Industrial Average fell 0.8%, while the benchmark S&P 500 and technology-heavy Nasdaq Composite declined 1.3% and 1.9%, respectively, with both snapping two weeks of gains.
Next week is expected to be another eventful one as investors continue to gauge the outlook for inflation, the economy, and interest rates.
On the economic calendar, most important will be Wednesday’s U.S. consumer price index report for August, which is forecast to show headline annual CPI accelerating to 3.6% from the 3.2% increase seen in July.
The latest monthly updates on retail sales, and producer prices will also be in focus.
The data will be key in determining what the Fed does through the end of the year. While traders see a 92% chance of the U.S. central bank leaving rates unchanged at the September FOMC meeting, they are pricing in a 47% chance of a 25-basis point hike in November.
Meanwhile, there are just a handful of companies reporting corporate results as the Q2 earnings season draws to a close, including Adobe (NASDAQ:ADBE), and Lennar (NYSE:LEN).
Regardless of which direction the market goes next week, below I highlight one stock likely to be in demand and another which could see fresh downside.
Remember though, my timeframe is just for the week ahead, Monday, September 11 - Friday, September 15.
Stock To Buy: Oracle
I believe Oracle's (NYSE:ORCL) stock will outperform in the coming week, with a potential breakout to a new record high on the horizon, as the cloud and software company will deliver better-than-expected earnings thanks to a strong performance in its cloud business.
Oracle is scheduled to deliver its fiscal first quarter update after the U.S. market closes on Monday, September 11 at 4:05PM ET.
Market participants expect a sizable swing in ORCL shares after the report drops, according to the options market, with a possible implied move of 5% in either direction. Shares rallied more than 6% after its last earnings report in June.
Wall Street sees the Austin, Texas-based tech titan earning $1.15 per share for the August-ended quarter, improving about 12% from the year-ago period due to the positive impact of ongoing cost-cutting measures.
Analysts have raised their EPS estimates 10 times in the past 90 days, according to an InvestingPro survey, while 11 of the analysts surveyed downwardly revised their ORCL earnings forecast.
Meanwhile, Oracle’s revenue is forecast to rise roughly 9% year-over-year to $12.47 billion, reflecting strong growth in its cloud services and infrastructure business, which is getting a boost in demand from generative AI companies.
As such, I believe Oracle CEO Safra Catz will provide an upbeat outlook for the rest of the year as the tech company’s cloud business is well positioned to benefit from the growing AI trend and its tight partnership with Nvidia (NASDAQ:NVDA).
ORCL stock closed at $126.32 on Friday, within sight of its all-time high of $127.54 touched on June 15. At current levels, Oracle has a market cap of around $343 billion.
Year-to-date, shares have rallied 54.5%, much better than the 22.5% gain experienced by the SPDR® S&P Software & Services ETF (NYSE:XSW), which tracks an equal-weighted index of software and services companies in the S&P 500.
Stock To Sell: Apple
Fresh off one of its biggest weekly losses of 2023, I expect Apple's (NASDAQ:AAPL) stock to extend its downtrend in the week ahead as the tech giant prepares to unveil new iPhone 15 models amid a plethora of negative headwinds.
AAPL shares, which tumbled 6% last week to wipe out roughly $200 billion from its market value, ended Friday’s session at $178.18. The stock has now pulled back more than 10% since reaching a record high of $198.23 during the summer.
Investors will tune in to Apple’s fall launch event, dubbed ‘Wonderlust’, which is scheduled to take place at its Cupertino, California headquarters on Tuesday, September 12 starting at 1:00PM ET / 10:00AM PT.
The consumer electronics conglomerate is widely expected to introduce four new phone handsets, including two basic 6.1-inch versions of the iPhone 15 Plus as well as two high-end 6.7-inch versions of the iPhone 15 Pro, and iPhone 15 Pro Max. Pricing on the iPhone 15 Pro is anticipated to come in at $1,099 and the iPhone Pro Max is being listed at $1,199.
Outside of new iPhones, Apple is also slated to debut its Apple Watch Series 9 at the event. The Tim Cook-led company could also unveil new AirPods.
Apple’s product events have a history of moving AAPL stock, often resulting in sizable moves. In the past, shares have rallied in the three trading days ahead of a product event and then underperformed in the three days following.
Meanwhile, a weak technical picture could also contribute to more selling pressure after shares of the world’s most valuable company broke below their 50-day, and 100-day moving averages on fears that China was making it a trade war target.
In a recent development, Beijing ordered central government officials to not use iPhones for official purposes, while state-owned companies and government agencies were also considering similar moves.
That coincided with news that Chinese tech stalwart Huawei Technologies launched its new high-end Mate 60 Pro+ smartphone model, which is seen as a direct competitor to Apple’s iPhone 15.
China is one of Apple’s most important markets and accounts for roughly 19% of its overall revenue.
It should be noted that Apple’s stock is still overvalued as per the quantitative models in InvestingPro, which point to potential downside of 7.3% from Friday’s closing price.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading decisions.
Disclosure: At the time of writing, I am long on the Dow Jones Industrial Average via the SPDR Dow ETF (DIA). I also have a long position on the Energy Select Sector SPDR ETF (NYSE:XLE) and the Health Care Select Sector SPDR ETF (NYSE:XLV). I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies' financials. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.