The momentum the stock market has witnessed over the past several weeks is here to stay as evidenced by the strong GDP report that came out on Friday.
First-quarter gross domestic product came in at 3.2%, the Commerce Department said on Friday. The number topped the consensus economist estimate of 2.5%. The better-than-expected number was driven by an increase in exports, among other factors. Investors celebrated the news, sending the Dow Jones Industrial Average 81.25 points higher Friday to end at 26,543.33, while the S&P 500 index SPX added 13.71 points to finish at 2,939.88. The Nasdaq Composite Index rose 27.72 points, 0.3%, to close at 8,146.40.
The positive GDP news arrived on the heels of strong earnings reports from the likes of Ford (F), Facebook (FB), Microsoft (MSFT) and Amazon (AMZN). The latter raised the bar by announcing plans to turn its 2-day shipping for Prime members to 1-day shipping — a move aimed at further disrupting traditional retail. The net effect of all of this? An increased appetite for equities, where there is seemingly no signs of slowing down, according Chris Rupkey, chief financial economist at MUFG.
“The economic expansion will set new records for longevity in July and it looks like there is no stopping this economy,” Rupkey said in a note. Adding, “So far the fears [of a global growth slowdown] are unfounded.” For the week the S&P 500 climbed 1.2% and the Nasdaq rallied 1.9%, netting its fifth weekly gain in a row. More positive earnings should continue to fuel the momentum in equities. Here are the stocks to keep an eye on.
Wall Street expects Alphabet to earn $10.56 per share on revenue of $37.34 billion. This compares to the year-ago quarter when earnings came to $13.33 per share on revenue of $31.15 billion.
What to watch: Past concerns about the company’s profit margins have been corrected amid stronger Traffic Acquisition Costs in the advertising business as well as other operational improvements. But among the company’s expanding services portfolio, Wall Street will take an interest in Google’s Cloud performance compared to leaders Amazon and Microsoft — both of which have crushed their cloud numbers. Google’s improving search features and advertising dominance are expected to drive top-line growth as evidenced by Facebook’s solid numbers.
General Electric (GE) - Reports before the open, Tuesday, Apr. 30
Wall Street expects GE to earn 9 cents per share on revenue of $27.05 billion. This compares to the year-ago quarter when earnings came to 16 cents per share on revenue of $28.66 billion.
What to watch: The potential trade deal between the U.S. and China has sparked interest in industrial stocks as evidenced by the 22% year to date rise in the iShares U.S. Industrials ETF (IYJ). And among the biggest gainers is GE, which has seen its stock skyrocket 31% this year. It would seem investors are embracing the leadership change and the new vision outlined by new CEO Lawrence Culp, including divestments of a handful of business assets that can no longer grow. These moves allow the company to streamline its operations, while locking in proceeds it can then use to service long-term debt. There are also signs of margin improvement, suggesting meaningful value-creation is underway.
Apple (AAPL) - Reports after the close, Tuesday, Apr. 30
Wall Street expects Apple to earn $2.36 per share on revenue of $57.44 billion. This compares to the year-ago quarter when earnings came to $2.73 per share on revenue of $61.14 billion.
What to watch: Apple has made several headlines recently. But none bigger than reaching a settlementwith Qualcomm and forging a multi-year patent license agreement. Apple and Qualcomm, which were in a long-standing patent license dispute, agreed to dismiss all litigation and the companies also reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement. This means when it comes to the push for 5G both companies realized they need each other. But this agreement came after Apple explored all options, including buying Intel’s (INTC) chip business, according to the Wall Street Journal. This deal would have been to, presumably, develop its wireless chips in-house and walking away from Qualcomm altogether. Analyst will try to unpack all of that on Tuesday.
Advanced Micro Devices (AMD) - Reports after the close, Tuesday, Apr. 30
Wall Street expects AMD to earn 5 cents per share on revenue of $1.26 billion. This compares to the year-ago quarter when earning were 11 cents per share on $1.65 billion in revenue.
What to watch: After a massive 30% correction to end the year, AMD shares have been on fire, skyrocketing some 51% year to date. AMD’s popularity has been driven by several factors, namely the improving business conditions and its diverse range of products for growing markets such as client CPUs, server CPUs and GPUs for data centers and gamers. The recent entry in the realm of gaming by Apple and Google have magnified this potential. And this is despite intense competition from Nvidia (NVDA) and the aforementioned Intel. Can AMD’s earnings and guidance Tuesday keep the momentum going?
Qualcomm (QCOM) - Reports after the close, Wednesday, May 1
Wall Street expects Qualcomm to earn 71 cents per share on revenue of $4.8 billion. This compares to the year-ago quarter when earnings came to 80 cents per share on revenue of $5.23 billion.
What to watch: Qualcomm’s settlement with Apple means the two will go back to doing business, which is a win-win for both companies. Despite recently losing modem placement in some iPhones, Qualcomm’s are still well ahead of competitors when it comes to speed. And Qualcomm’s 5G modems are something Apple could be looking to leverage in its new iPhones as 5G technology is starting to take shape. For Qualcomm, the company’s improved modem performance could put it in a position to secure higher fees going forward and further solidify its market share.
Activision Blizzard (ATVI) - Reports after the close, Thursday, May 2
Wall Street expects Activision to earn 26 cents per share on revenue of $1.25 billion. This compares to the year-ago quarter when earnings came to 38 cents per share on revenue of $1.38 billion.
What to watch: Expectations are low for Activision, which has seen its stock price fall 30% over the past year, pressured by the emerging popularity battle royale games, which have leapfrogged traditional console and mobile games Activision relies on. On Thursday investors will get a sense of not only what the quarter looks like, but also how management feels about the company’s turnaround potential. In the near term, investors will want to see meaningful positive impact from the a new generation of games the company has released. The maker of "Call of Duty" will need to demonstrate it still has a potent combination of strong digital revenues and rising profits margins.
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