U.S. stocks closed higher on Friday, as the S&P 500 and Nasdaq Composite both ended at new records after the monthly jobs report kept the door open for another rate cut from the Federal Reserve later this month.
For the week, the Nasdaq jumped 3.3% and the S&P 500 rose 1% to notch their third straight positive week. The Dow Jones Industrial Average fell 0.6%, despite hitting a fresh all-time peak on Wednesday.
Source: Investing.com
The week ahead is expected to be another eventful one as investors continue to gauge the outlook for the economy and interest rates. As of Sunday morning, investors see an 89% chance of the Fed cutting rates by 25 basis points at its December 18 meeting.
On the economic calendar, most important will be Wednesday’s U.S. consumer price inflation report for November, which is forecast to show headline annual CPI rising 2.7% year-over-year, compared to October’s 2.6% increase. The CPI data will be accompanied by the release of the latest figures on producer prices, which will help fill out the inflation picture.
Source: Investing.com
Elsewhere, on the earnings docket, there are just a handful of corporate results due, including Broadcom (NASDAQ:AVGO), Oracle (NYSE:ORCL), Adobe (NASDAQ:ADBE), MongoDB (NASDAQ:MDB), Costco (NASDAQ:COST), GameStop (NYSE:GME), and Macy’s (NYSE:M) as Wall Street’s reporting season draws to a close.
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, December 9 – Friday, December 13.
Oracle stands out as a top buy this week, with its highly anticipated earnings report set to be a major catalyst for the stock. The cloud and software leader will likely deliver another quarter of upbeat top-and bottom-line growth and provide solid guidance thanks to broad strength in its cloud infrastructure business.
Oracle is scheduled to release its fiscal second quarter update after the closing bell on Monday at 4:05PM EST. A call with CEO Safra Catz as well as Chairman and Chief Technology Officer Larry Ellison is set for 5:00PM ET.
Market participants expect a sizable swing in ORCL stock after the print drops, according to the options market, with a possible implied move of +/-8.7% in either direction.
Analyst sentiment is optimistic, with 10 upward revisions to Oracle’s earnings estimates in the past 90 days, further boosting confidence.
Source: InvestingPro
Wall Street sees the Austin, Texas-based database giant earning $1.48 per share for the November-ending quarter, rising 10.4% from the year-ago period. Meanwhile, revenue is projected to increase 9.3% annually to $14.1 billion.
The results would mark the second straight quarter of accelerating top-line growth, supported by increasing AI-driven demand for Oracle’s database solutions and cloud infrastructure services.
Oracle’s earnings have historically caused notable stock price swings, with shares surging 10% following its last earnings release in September. Data from InvestingPro suggests a favorable trend, with the cloud company gapping up in price after the last three earnings reports.
ORCL stock ended Friday’s session at $191.69, just below its November 21 record high of $196.04. With a market cap of $531.2 billion, Oracle is one of the most valuable database software and cloud computing companies in the world.
Source: Investing.com
The stock has surged over 80% year-to-date, its best annual performance since 1999.
It is worth mentioning that Oracle has an above-average InvestingPro Financial Health Score of 2.8/5.0, highlighting its solid earnings prospects, and a robust profitability outlook. Furthermore, it should be noted that the tech company has raised its annual dividend payout for 11 consecutive years.
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In contrast, AutoZone (NYSE:AZO) faces mounting challenges. The auto-parts retailer is set to release its fiscal Q1 earnings report on Tuesday morning at 6:55AM ET, and analysts expect muted results.
According to the options market, traders are pricing in a swing of +/-5.7% in either direction for AZO stock following the print.
Underscoring several challenges facing AutoZone, all 14 analysts surveyed by InvestingPro cut their profit estimates ahead of the report to reflect a 7% decline from their initial expectations.
Source: InvestingPro
Wall Street projects earnings of $33.72 per share, marking a modest 3.6% increase from $32.55 a year earlier. If that is confirmed, it would mark the second consecutive quarter of low single-digit earnings growth. Meanwhile, revenue is anticipated to grow marginally by 2.4% to $4.3 billion, highlighting cautious consumer spending and rising competition.
Additionally, looming headwinds which threaten to pressure AutoZone’s margins are dampening sentiment amid worries that the incoming Trump administration will impose high tariffs as the company imports goods and parts from China.
As such, AutoZone’s forward guidance will likely underwhelm investors due to the current macroeconomic environment.
AZO stock closed at a fresh all-time high of $3,309.44 on Friday, eclipsing the previous record of $3,256 reached on March 22. At current valuations, AutoZone has a market cap of $56 billion, making it the second largest auto-parts store chain in the country, behind O’Reilly Automotive.
Source: Investing.com
Shares have gained 28% in the year-to-date.
It should be noted that its valuation remains stretched compared to peers, and the near-term pressures may limit upside potential. The average Fair Value for AZO stands at $2,973.63, a potential downside of -10.1% from current levels.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF (NYSE:XLK).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.
