The Week Ahead – April 18, 2022

MONDAY SUMMARY

The Dow Jones Industrial Average was forced lower after briefly moving into positive territory as stocks battled back. Twitter (TSLA) jumped after Tesla (TSLA) CEO Elon Musk and Twitter founder Jack Dorsey attacked the Twitter board amid an ownership battle.

LPL Financial (LPLA) skidded after Charles Schwab (SCHW) missed earnings views. Goldman Sachs (GS) was the top blue chip.

Volume was lower on both the New York Stock Exchange and the Nasdaq compared to the same time Thursday, the most recent trading day after Friday’s holiday.

Meanwhile, the yield on the benchmark 10-year Treasury note popped about five basis points to 2.86%. Oil also jumped, with West Texas Intermediate crude up more than 1% to more than $108 per barrel. Expectations of rising demand in China are pushing up prices.

The S&P sectors were mixed. Energy and financials were shining brightest while health and consumer staples were the worst areas.

Small caps were struggling to fight off the bear attack though, with the Russell 2000 falling 0.5%. Growth stocks were also struggling to find traction. The Innovator IBD 50 ETF (FFTY), a bellwether for growth stocks, dipped 0.2%.

Stock Recommendation for the Week

Murphy Oil is actionable after the stock broke out of a rare ascending base pattern. The buy point here is 43.30. The relative strength line has just hit a new high, which is an encouraging sign. Earnings are seen skyrocketing 233% in 2022 before rising another 39% the following year. Big money has been snapping up the stock in recent weeks. Laredo Petroleum slid back under its 88.40 entry after breaking out of a cup-with-handle base. With institutional interest also strong here, it might be one to add to a watchlist.

Blue Chips Report This Week

Johnson and Johnson (JNJ)
IBM (IBM)
Bank of America (BAC)
Procter & Gamble (PG)
Travelers (TRV)
Dow Inc. (DOW)
American Express (AXP)
Verizon Communications (VZ)

Elon Musk Chases Twitter

Musk’s pursuit of Twitter remains a top story following the poison pill.

Calendar

The focus turns to housing with the National Association of Home Builders’ survey, a housing starts report, and the existing home sales update all due out.  The Fed manufacturing survey and latest PMI prints will also be released.

Investor Day Conferences
Lululemon (LULU) holds an investor event on April 20. The retailer is expanding into new categories like tennis, golf, footwear, and hiking.

Earnings

Monday, April 18
Bank of America (BAC), Charles Schwab (SCHW) and J.B. Hunt Transport (JBHT).

Trucking stocks have taken an absolute beating this year. The biggest decliners amid the new macro reset are Yellow Corporation (YELL) -49%, ArcBest (ARCB) -37%, Saia (SAIA) -31%, U.S. Xpress Enterprises (USX) -29% and Knight-Swift Transportation Holdings (KNX) -22%. More than half of all trucking stocks are down 20% YTD. Despite the adverse market condition for trucking, I am building a position in P.A.M. Transportation Services (PTSI) and Daseke (DSKE).

PTSI

DSKE

Tuesday, April 19
Johnson & Johnson (JNJ), Lockheed Martin (LMT), Travelers (TRV), IBM (IBM) and Netflix (NFLX) and Hasbro (HAS).

Johnson & Johnson kicks off earnings season for the healthcare sector. The quarter has seen persistent pandemic headwinds and increased foreign exchange pressure on top of what is usually a seasonally light quarter for the bio pharma industry. JNJ’s broader portfolio shows strength, with Pharma and Medical Devices well-positioned to regain momentum due to their solid underlying fundamentals.

Netflix expectations are for revenue of $7.9B and EPS of $2.87. The company guided for 2.5M net subscriber adds and the consensus forecast from analysts is for 2.6M. Average revenue per user, which is seen rising 8% year-over-year to $11.75 for the quarter. Content includes notable releases like the Ozark finale, Stranger Things Season 4, and a new season of Peaky Blinders.

Wednesday, April 20
Anthem (ANTM), Procter & Gamble (PG), Abbott Labs (ABT), Tesla (TSLA), United Airlines (UAL) and Lam Research (LRCX).

Procter & Gamble expects revenue of $18.69B and an EPS mark of $1.30. Organic sales are forecast to rise 6.4% during the quarter with a boost from higher pricing. Gross margin is seen contracting due to higher commodities and freight costs. Consumption in the U.S. continues to remain healthy, despite inflationary pressure on retail pricing.

Thursday, April 21
AT&T (T), Dow (DOW), American Airlines (AAL), Philip Morris International (PM), Snap (SNAP) and Nucor (NUE).

Nucor is on a tear this year. NUE carries a P/E of 8.3x and revenue has grown 81% year-over-year. The dividend yield is meager, but you can write covered calls. Remember, when you sell a covered call, you get paid in exchange for giving up a portion of future upside. Nucor’s near-term prospects are strengthening, with steel prices marching higher. I believe that paying 7x this year’s free cash flow for NUE is compelling.

NUE

Friday, April 22
Verizon (VZ), American Express (AXP) and Kimberly-Clark (KMB).