Momentum is back even as the battle between positive and negative news cycles rage on. Investors who were on the sidelines waiting for an “all clear” signal seemingly hopped onboard this week, helping the three major averages to book solid gains for week, thanks to back-to-back positive trading sessions. In all, it appears that the market has finally embraced the current path of the Federal Reserve and decisions regarding inflation and interest rates.
After suffering declines in the early part of the week, stocks finished higher Friday, recovering some of the losses recorded in recent weeks. The Dow Jones Industrial Average surged 387.4 points, or 1.17%, to end Friday's session at 33,390.97. Among the Dow’s notable gainers were Apple (AAPL), Salesforce (CRM), Microsoft (MSFT) and Walt Disney (DIS). The S&P 500 added 64.29 points, or 1.61%, finishing at 4,045.64. It was a broad rally as all eleven S&P sectors finished higher, driven by a 2% rise in Communication Services, Consumer Discretionary and Technology.
The tech-heavy Nasdaq Composite gained 226.02 points, or 1.97%, to close at 11,689.01. The Nasdaq was powered by, among others, a better-than 6% rise in shares of Meta Platforms (META) and a 3.61% gain in Tesla (TSLA). Friday’s rally comes on the heels on Thursday's gains which were driven by positive comments from Atlanta Fed President Raphael Bostic which hinted that the Fed’s next rate hike could 25 basis points, and not the 50 basis points the market is expecting.
Another reason for Friday's rally could be attributed to bond yields which stocks are extremely sensitive to. On Friday the yield on benchmark 10-year Treasury note slipped below 4%, which is a closely-watched threshold. The market has been eying that key level for a signal to enter “risk on” mode. For the week, the Dow gained 1.75%, snapping a weekly losing streak that stood at four. The S&P 500 ended the week up 1.90%, notching its first positive week in the last four. The Nasdaq was the week’s strongest gainer, rising 2.58%. The main question heading into the week is whether this recent rally will continue.
While earnings season is beginning to slow down, there are still several key companies reporting. I'll be watching Oracle and JD.com earnings in particular.
JD.com (JD) - Reports before the open, Thursday, Mar. 9
Wall Street expects JD to earn 52 cents per share on revenue of $43.05 billion. This compares to the year-ago quarter when earnings came to 33 cents per share on revenue of $38.34 billion.
What to Watch: There is renewed optimism that a rebound in China might be underway as the country emerges from its zero-COVID sluggishness. Although JD stock, which is down 16% year to date, doesn’t currently reflect that optimism, the company’s fundamental are strong. While the Chinese e-commerce giant has made a name for itself by selling electronics, appliances and other consumer items, which accounts for some 50% of its revenues, JD wants to emerge as a leader in the realm of technology and logistics — something reminiscent of Amazon (AMZN). Add in the growth of JD Mall, combined with its investments in real estate — aimed at building out its logistics capabilities — there are still several growth catalysts to be excited about. In the most recent quarter, revenues rose 11% year over year, while service revenues increase of 42% year over year. Just as impressive, JD’s income from operations surged 235% year over year. Combined with the Chinese regulators’ eagerness to reopen the country's economy, reversing their long-standing zero-Covid policy, JD’s growth prospects become even more favorable. This means a bet on the company's ability to capitalize on China’s reopening looks like a good one, particularly given the company’s diversified revenue sources within the country. On Thursday the stock can reverse course if JD can deliver a top- and bottom-line beat and provide confidence outlook for the next quarter and full year.
Oracle (ORCL) - Reports after the close, Thursday, Mar. 9
Wall Street expects Oracle to earn $1.20 per share on revenue of $12.42 billion. This compares to the year-ago quarter when earnings came to $1.13 per share on revenue of $10.51 billion.
What to watch: Shares of Oracle have outperformed the market over the past year, despite the massive turbulence and punishment absorbed by software stocks. The shares have risen more than 11% in the past twelve months, besting the 9% decline in the S&P 500 index. Meanwhile, over the past six months, the stock has gained almost more than 16%, compared to the 1.45% rise in the S&P 500 index. The reason for the outperformance is due to the growing prospects of the Oracle’s cloud ambitions, namely Oracle Cloud Infrastructure (OCI), which is the company’s primary cloud offerings. Designed to be highly secure, reliable, and scalable, OCI offers corporations various cloud computing services such as storage, networking, compute and databases. The primary target is enterprise customers who wants to move their mission-critical workloads to the cloud. OCI is in addition to Oracle’s cloud expansion goals and now fits into its applications portfolio, which currently includes Oracle Fusion Cloud Applications and customer experience (CX) applications. Currently seen as a transformation play based on its business transition towards a cloud subscription-based model, Oracle on Thursday must demonstrate how it can become a future global cloud leader.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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