The market giveth and the market taketh away. After last week’s strong gains, during which the Dow Jones Industrial Average extended its winning streak to six, concerns regarding U.S.-China trade tension have crept back in.
Stocks ended Friday lower as the Dow fell 63.20 points, or 0.3%, to 25,106.33, while the S&P 500 index rose 1.83 points to 2,707.88 and the Nasdaq Composite Index gained 9.85 points, or 0.1%, to 7,298.20. The core issue driving the market on Friday was a report that President Donald Trump would not meet Chinese President Xi Jinping before a March 1 trade-deal deadline.
This news pushed the Dow lower more than 300 points on Friday, but the stocks trended higher on a CNBC report suggesting that the U.S. tariffs would remain at 10% and not be raised to the scheduled 25%. Investors cheered as stocks finished off session lows, helping the Dow to post yet another weekly gain, thus extending its streak.
If there were ever any evidence that investors were resilient and the underlying strength in the stock market was solid, this was it. It also helps that, as earnings season is winding down, companies which have reported so far are beating estimates by more than 2-to-1 compared to those that have missed. This coming week, more positive earnings should fuel the momentum in equities. Here are the stocks to keep an eye on.
Activision Blizzard (ATVI) - Reports after the close, Tuesday, Feb. 12
Wall Street expects Activision to earn $1.29 per share on revenue of $3.04 billion. This compares to the year-ago quarter when earnings came to 94 cents per share on revenue of $2.64 billion.
What to Watch: It’s “game on” for Activision, which has seen its stock price nearly halved since reaching its 52-week high in October. And investors are now hoping for “less bad” results given the weak earnings and disappointing guidance recently released from rivals Electronic Arts (EA) and Take-Two Interactive (TTWO). Accordingly, Activision, which makes "Call of Duty" and other video games, will need to demonstrate it still has a potent combination of strong digital revenues and rising profits margins. If it can do that, the stock —still down 48% from its 52-week high — should rebound strongly.
Baidu (BIDU) - Reports after the close, Tuesday, Feb. 12
Wall Street expects Baidu to earn $1.79 per share on revenue of $3.9 billion. This compares to the year-ago quarter when earnings came to $2.15 per share on revenue of $3.39 billion.
What to Watch: The company’s increased investments in its core search business and artificial intelligence (AI) technologies, while divesting non-core business, continues to pay off. Meanwhile, its efforts to bolster its presence in the autonomous driving space to compete with Google (GOOG, GOOGL), among others, should drive top-line growth for years to come. But a potential decline in the Chinese economy has become a concern for investors, especially given Baidu controlled more than 70% of China’s Internet search engine market in December.
Cisco (CSCO) - Reports after the close, Wednesday, Feb. 13
Wall Street expects Cisco to earn 72 cents per share on revenue of $12.41 billion. This compares to the year-ago quarter when earnings came came to 63 cents per share on revenue of $11.89 billion.
What to Watch: We know the company continues to scale back its switching and routing businesses, while trying to develop growth businesses within service areas such as security, the cloud, data center and analytics. Progress on that front has been decent, though unspectacular. But the Street is eager to see what will its 2019 guidance look like since its forecast could be a signal the extent to which businesses believe they can spend on their infrastructure, while signaling how tariffs have impacted confidence.
Nvidia (NVDA) - Reports after the close, Thursday, Feb. 14
Wall Street expects Nvidia to earn $1.40 per share on revenue of $2.7 billion. This compares to the year-ago quarter when earnings came to $1.78 per share on revenue of $2.91 billion.
What to Watch: The cryptocurrency boom is over. Nvidia and rival AMD (AMD) have affirmed this. But does it warrant the punishment Nvidia stock has suffered? Shares of the graphic chip powerhouse are down almost 30% since the company’s last earnings report, while the S&P 500 index is down about 1% during that span. Excess inventory of its gaming chipsets, has caused the company to cut its Q4 outlook, which follows its Q3 earnings and revenue miss. But it’s tough to ignore how attractive these shares have become. And if there is no more bad news to report, Nvidia could be headed for a rebound.
PepsiCo (PEP) - Reports before the open, Friday, Feb. 15
Wall Street expects PepsiCo to deliver EPS of $1.49 per share on revenue of $19.52 billion, compared to the year-ago quarter when earnings came to $1.31 per share on $19.53 billion in revenue.
What to Watch: Pepsi has been a hallmark blue-chip investment holding for some time and remains well diversified between beverages and snacks. That said, on Friday the company must address fears about declining soda consumption and guide in a way to suggests confidence about its long-term growth and competitive position. The company is adjusting to consumers’ need for healthier beverage choices with low salt, sugar, and more natural ingredients. To the extent Pepsi can demonstrate strength in organic revenue, particularly from beverages in North America, the stock can realistically regain its 52-week high of $122.