The multi-week rally that pushed the S&P 500 index to 14-month highs might not be over, but bulls decided to take a breather on Friday. After six consecutive days of gains in both the tech-heavy Nasdaq Composite and S&P 500 index, stocks ended lower on Friday with all three major averages closing in negative territory. Still, the bulls are still firmly in control with all three major averages booking gains for the week after investors not only received on Wednesday the long-awaited pause in interest rate hikes from the Federal Reserve, the market was also encouraged by new inflation data that showed continued improvement.
On Friday’s trading, the Dow Jones Industrial Average declined 108.94 points, or 0.32%, to end its session at 34,299.12. The S&P 500 gave up 16.25 points, or 0.37%, finishing at 4,409.59. Eight of the eleven S&P sectors ended in negative territory, led by Communication Services and Technology. The tech-heavy Nasdaq Composite lost 93.25 points, or 0.68%, to close at 13,689.57.
Friday’s decline comes on the heels on Thursday’s strong rally, driven by positive inflation data and the Fed’s decision to pause rate hikes. For the week, the S&P 500 gained 2.58%. Driven by the technology surge, the Nasdaq gained 3.25%, while the blue-chip Dow rose 1.25%. The Dow Jones Industrial Average and the S&P 500 index notched their fifth straight week of positive gains, while the Nasdaq Composite has now been positive for eight consecutive weeks.
The main question heading into the week is whether this recent rally will continue, particularly with strong gains already logged tech heavyweights such as Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL) and Meta Platforms (META). There’s also Tesla (TSLA) which has been higher for 14 of 15 days, while the likes of Netflix (NFLX) have made multiple 52-week highs. There’s now the question of valuation. But as I’ve said in recent posts, with each leg higher, the buying opportunity gets harder to justify.
However, the resilience we have witnessed in the economy and labor market continues to suggest staying invested is the best way to counter inflation, especially when there are signs that inflation is getting under control. Here are the stocks I’ll be watching this shortened week; as a reminder, markets are closed on Monday for Juneteenth, and trading re-opens on Tuesday.
FedEx (FDX) – Reports after the close, Tuesday, Jun. 20
Wall Street expects FedEx to earn $4.90 per share on revenue of $22.77 billion. This compares to the year-ago quarter when earnings came to $6.87 per share on revenue of $24.39 billion.
What to watch: Shares of the transportation giant have risen 36% year to date, besting the 15% rise in the S&P 500 index. Currently trading at $234, the stock has added more than 16% since the company’s last earnings results. Even more impressive, the shares have skyrocketed close to 70% since dropping to $140 last September. Among the many reasons FedEx stock has moved so impressively is the company announcing “One FedEx” in early April, along with management offering its strategic expense savings initiative. Part of the cost savings involves the company consolidating its separate delivery companies into a single entity, to compete better with United Parcel Service (UPS) and Amazon (AMZN).
“We believe now is the right time to reorganize how we work together,” CEO Raj Subramaniam said during a company meeting in New York City. “We will be leaner, more agile and better positioned to execute on our mission to help customers compete and win with the world’s smartest logistics network.” Its management has shown an ability to overcome these headwinds. They have identified $4 billion in permanent costs by the end of its 2025 financial year, and believes the company can hit $1 billion in permanent cost cuts in the current fiscal year, ending in May. Amid macroeconomic weakness in the U.S. and Asia as well as service challenges in Europe, the company’s three business segments had suffered due to lower shipping volumes, in particular, the Express segment has been in the spotlight and has showed some weakness. Investors are applauding the company’s progress. On Tuesday the company will look to preserve investor confidence as it relates to profitability improvements among the company’s various business segments.
Accenture (ACN) – Reports before the open, Thursday, Jun. 22
Wall Street expects Accenture to earn $3.04 per share on revenue of $16.56 billion. This compares to the year-ago quarter when earnings came to $2.79 per share on revenue of $16.16 billion.
What to watch: Amid the AI-driven momentum software stocks have enjoyed this year, Accenture shares have gained in popularity. ACN stock has surged almost 20% over the past thirty days, besting the 3% rise in the S&P 500 index. The shares are up 21% year to date, while the S&P 500 index has risen 15%. And there’s more gains to come in Accenture, according to analysts at Piper Sandler. Citing continued bookings/revenue growth trends in its managed services business, analysts have upgraded Accenture stock, boosting its price target from $250 to $316. They noted that although it’s premature to forecast Accenture’s AI growth capabilities, they believe enterprise adoption will come to Accenture once enterprise fully assess outline their AI approach as part of their overall tech strategy.
As for its core business, Accenture could also see improvement in its consulting business (which fell -1 Y/Y in Q2), as the demand for its AI and data related services grows. A leading specialist in the IT consulting and outsourcing space, Accenture has a business that has benefited immensely from the rapid growing demand not only for IT services, but also from increased cloud adoption and digital transition. And this growth will continue through 2025, according to research firm Gartner, which predicts organizations will “increase their reliance on external consultants.” The company’s guidance on Thursday will be looked upon to assess not only Accenture’s stock valuation, but also whether (and how soon) Accenture’s AI prowess can boost their bottom line.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.