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The S&P 500 has all-time highs in its sights. Thursday’s close leaves the index less than 1% below levels reached in July, near the beginning of earnings season.
Of course, earnings reports apparently weren’t enough: after touching that closing high on July 26, the S&P promptly fell almost 6% in the following six sessions. But once again — as was the case after first-quarter earnings season — the lack of earnings news, perhaps oddly, has been positive for the market. U.S. equities have moved higher in the last few weeks.
A month out from third-quarter earnings, the question is whether the pattern will repeat. And a quiet week on the earnings calendar still might give some clues. There are two obviously big earnings reports — but some intriguing smaller releases as well.
Most notably, the strength of the U.S. consumer will be tested. With consumer spending carrying the economy, and fears of a so-called “earnings recession” rising, those tests are worth watching.
Meanwhile, a key report from a cyclical semiconductor play will move that sector — and highlight broader trends in tech as well. All told, there will be news next week that might give a preview of next month — and in the meantime could help get U.S. stocks to new highs.
Earnings Report Date: Tuesday, Sept. 24, after market close
Fiscal first-quarter earnings from Nike (NYSE:NKE) look to be interesting for several reasons. First, the sneaker giant is a reasonably strong bellwether for consumer confidence. That’s particularly true given that Nike has its North America business back on track. The biggest risk to that business at the moment seems to be consumer cautiousness, rather than assortment missteps.
Second, Nike has a big — and successful — business in China. The company generated over $6 billion in revenue in that country during fiscal 2019. Investors in fellow consumer giants Starbucks (NASDAQ:SBUX) and Apple (NASDAQ:AAPL) surely will be watching to see if trade war factors have led to rising sentiment against American brands.
Finally, NKE stock isn’t cheap. It trades at over 30 times fiscal 2020 consensus earnings per share. And valuation does seem to be a concern. Nike shares have hit resistance multiple times over the last six months. A post-earnings gain could spark a breakout. A selloff on good news could signal that investors are paying attention to valuation of even the market’s best companies.
Conagra Brands (CAG)
Earnings Report Date: Thursday, Sept. 26, before market open
Nike isn’t the only consumer company of interest reporting next week. Conagra Brands (NYSE:CAG) will try and deliver good news in a consumer packaged goods sector that’s shown some life of late — but still has significant long-term questions.
Of course, this is also a reasonably big report for Conagra as well. CAG stock fell sharply last year, as its acquisition of Pinnacle Foods closed just as broad markets were headed south. Disappointing fiscal 2019 EPS guidance only added to the pressure.
CAG has rallied since, gaining 39% so far this year. For that rally to continue, the company needs to deliver on Thursday.
Micron Technology (MU)
Earnings Report Date: Thursday, Sept. 26, after market close
Memory chipmaker Micron Technology (NASDAQ:MU) heads into earnings near a 52-week high. That alone makes Thursday’s fiscal Q4 report look important.
But there’s more going on here than just the MU stock price. The optimism toward Micron stock is coming from optimism that memory prices are nearing a bottom. And so first-quarter guidance thus may be more important than Q4 results. The quarter itself is going to be tough: The Street projects an 85% decline in EPS year-over-year.
Micron earnings also will impact the chip sector as a whole. Like the market as a whole, the semiconductor sector is not far from all-time highs, as measured by the iShares PHLX Semiconductor ETF (NASDAQ:SOXX). If investors are waiting for a buying signal at these levels, Micron could well provide it.
As of this writing, Vince Martin has no positions in any securities mentioned.