All eyes were on Federal Reserve chairman Janet Yellen’s semi-annual testimony to Congress on Wednesday.
To the surprise of many, she walked back the impression the Fed was growing increasingly hawkish by noting interest rates wouldn’t have to rise all that much further to get to a neutral policy stance.
She maintained the belief that recent inflation weakness was driven by one-off factors and that “quantitative tightening” balance sheet normalization would begin soon.
Investors focused on the dovish comments; however, pushing risk assets higher and the Dow Jones Industrial Average to new intra-day record highs for the first time since mid-June. Long-term Treasury bonds also rallied, providing relief to risk parity funds hit in recent weeks by the combination of weakness in both bonds and equities.
But not everyone was impressed. Big bank stocks, for instance, declined on the news on a drop in long-term yields pressuring net interest margin hopes.
Here are six stocks that aren’t playing along:
Stocks Shooting Warning Flares: Deere & Company (DE)
Deere & Company (NYSE:DE) is getting hit hard on Wednesday, down 2.8%, after hitting resistance from its mid-June high. The catalyst was a negative crop conditions report from the U.S. Department of Agriculture resulting in big losses for corn and wheat futures.
Worries surround an abundant South American corn crop (negatively impacting U.S. corn prices and inventory levels) and an ongoing decline in U.S. crop conditions. All of this will negatively impact farmer earnings and the ability to finance new equipment purchases.
DE will next report results on Aug. 18 before the bell. Analysts are looking for earnings of $1.88 per share on revenues of $6.9 billion. When the company last reported on May 19, earnings of $2.14 beat the consensus estimate by 45 cents on a 2.2% rise in revenue. Watch for a possible decline to the November-May trading range near $110, which would be worth a 10%+ decline from here.
Stocks Shooting Warning Flares: CenturyLink (CTL)
Centurylink Inc (NYSE:CTL) shares are down 2.4% in trading on Wednesday, dropping further below its 50-day and 200-day moving averages to hit lows not seen since March. This continues a post-election malaise in the mid-$20s and represents a decline of nearly 20% from its mid-June high.
CTL will next report results on Aug. 2 after the close. Analysts are looking for earnings of 49 cents per share on revenues of $4.1 billion. When the company last reported on May 3, earnings of 52 cents per share missed estimates by a penny on a 4.4% drop in revenue.
Stocks Shooting Warning Flares: Harley Davidson (HOG)
Harley-Davidson Inc (NYSE:HOG) shares are down 2.9% as I write this, dropping out of a three-month consolidation range and falling away from its 200-day moving average. This takes shares back to levels not seen since October representing a drop of nearly 20% from its mid-March high. The drop was catalyzed by a cautious note from Goldman analysts citing weak channel activity indicating a soft Q2. Shares were also downgraded by Bernstein amid ongoing caution from the U.S. consumer.
The company will next report results on July 18 before the bell. Analysts are looking for earnings of $1.39 per share on revenues of $1.6 billion. When the company last reported on April 18, earnings of $1.05 beat estimates by 3 cents on a 15.7% decline in revenue.
Stocks Shooting Warning Flares: Morgan Stanley (MS)
Morgan Stanley (NYSE:MS) shares are rolling lower, down 1.2%, as it remains within the confines of a massive eight-month consolidation range. Watch for a drop to support near $41, which coincides with its 200-day moving average. Bank shares haven’t been doing much amid net interest margin concerns (from recent yield curve flattening) as well as industry management warnings that Q2 trading revenue wasn’t all that great.
MS will next report results on July 19 before the bell. Analysts are looking for earnings of 77 cents per share on revenues of $9.1 billion. When the company last reported on April 19, earnings of $1.00 per share beat estimates by 10 cents on a 25% increase in revenues.
Stocks Shooting Warning Flares: Best Buy (BBY)
Best Buy Co Inc (NYSE:BBY) shares are continuing to fall on Wednesday, down another 0.7% to cut below its 50-day moving average. This represents a 13% drop from its late May high on reports Amazon.com, Inc. (NASDAQ:AMZN) — which just had a very successful “Prime Day” promotion — is looking to start tech services offering that will challenges the company’s “Geek Squad” offering. Yet another way AMZN is delivering a serious punch to traditional retailers like BBY.
The company will next report results on Aug. 24 before the bell. Analysts are looking for earnings of 63 cents per share of BBY on revenues of $8.7 billion. When the company last reported results on May 25, earnings of 60 cents per share beat estimates by 20 cents on a 1% rise in revenue from the year-ago period.
Stocks Shooting Warning Flares: Fossil Group (FOSL)
Watchmaker Fossil Group Inc (NASDAQ:FOSL) just can’t catch a break, down another 6.5% on Wednesday to test its June lows as a combination of uneven retail sales and pressure from smart wearables keep eating into its top line growth. FOSL shares are down more than 70% from their post-election high in November. And the waterfall decline shows no signs of slowing. Less than four years ago, shares were trading above $125.
FOSL will next report results on Aug. 8 after the close. Analysts are looking for a loss of 38 cents per share on revenues of nearly $617 million. When the company last reported on May 9, a loss of $1.00 per share was 6 cents better than expected on an 11.8% decline in revenues.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
