The stock market ended mixed on Friday, with the S&P 500 and Nasdaq Composite posting back-to-back losing weeks. The 30-stock Dow Jones Industrial Average fell 0.5% on the week. The S&P 500 dipped around 0.4%. The tech-heavy Nasdaq declined less than 0.1%, while the small-cap Russell 2000 shed 0.3%.
The week ahead is expected to be busy with a key Federal Reserve policy meeting and tech earnings. The Fed is expected to keep interest rates unchanged Wednesday,but Chair Jerome Powell’s press conference could impact the market. Other economic reports include durable goods orders (Monday),the Consumer Confidence Index (Tuesday),and the producer price index (Friday).
Earnings reports are scheduled from Microsoft, tesla, Meta Platforms, Apple, IBM, ASML, SanDisk, Exxon Mobil, Chevron, Visa, Mastercard, American Express, SoFi Technologies, Unitedhealth Group, Boeing, UPS, Caterpillar, General Motors, Verizon, AT&T, Starbucks, American Airlines, RTX, and Lockheed Martin.
congress faces a Friday deadline to fund the government or risk a shutdown.
Stock To Buy: Apple
Apple is set to report earnings after the close Thursday, with expectations for a beat-and-raise quarter. Analysts project double-digit sales growth driven by iPhone demand and services revenue. The expected options market move is +/-4%. Profit estimates have been revised upward 21 times recently, with only three downward revisions.
Earnings are forecast at $2.67 per share (up 11.2% year-over-year) with revenue at $137.5 billion (up 10.6% year-over-year). iPhone and Services segments are expected to be strong, with upcoming product launches, including a foldable iPhone and AI-powered Siri, cited as catalysts.
Year-to-date, AAPL is down approximately 9%, closing at $248.04 Friday. Technicals suggest a “Strong Sell,” but with support near $247.53 and resistance at $248.87, a breakout could target $260+ if guidance is positive.
Trade Setup:
* Entry: $248 (pre-earnings)
* Target: $265 (gain ~7%)
* Stop-Loss: $240 (risk ~3%)
Stock to sell: Starbucks
Starbucks reports earnings Wednesday before the open with a more challenging outlook. The company is facing slowing same-store sales, competition, changing consumer spending, and cost pressures.
implied volatility suggests a +/-6.4% post-earnings move. Analysts are increasingly bearish, with 17 of 19 surveyed by InvestingPro revising EPS estimates downward.
EPS is expected to decline 15.9% to $0.59, with revenue up a modest 2.5% to $9.62 billion. Starbucks faces competition from Dunkin’ and McDonald’s, and concerns remain about its growth in China.
How did the Fed’s FOMC decision and the looming government shutdown affect Apple’s buy rating and Starbucks’ sell recommendation during the week’s market volatility?
Table of Contents
- 1. How did the Fed’s FOMC decision and the looming government shutdown affect Apple’s buy rating and Starbucks’ sell recommendation during the week’s market volatility?
- 2. Fed FOMC, Tech Earnings and Shutdown Deadline Drive week’s Volatility – Apple a Buy, Starbucks a sell
- 3. decoding the Fed’s Stance: FOMC Impact
- 4. Tech Earnings: Mixed Bag and Market Reactions
- 5. Shutdown Showdown: Political Risk and Economic Uncertainty
- 6. Apple: A Buy Opportunity amidst Volatility
- 7. Starbucks: A Sell Recommendation – Challenges Brewing
Fed FOMC, Tech Earnings and Shutdown Deadline Drive week’s Volatility – Apple a Buy, Starbucks a sell
The market experienced a turbulent week, fueled by a potent combination of factors: the Federal Reserve’s FOMC meeting, a fresh wave of tech earnings reports, and the looming threat of a government shutdown.This confluence created significant volatility, demanding a nuanced approach to investment strategy. Hear’s a breakdown of the key drivers and our take on two major players – Apple and Starbucks.
decoding the Fed’s Stance: FOMC Impact
The Federal Open Market Committee (FOMC) meeting was the week’s central event. While a rate hike wasn’t on the table, the messaging around future monetary policy proved pivotal. The Fed maintained its hawkish stance, signaling a willingness to keep interest rates elevated for longer then previously anticipated to combat persistent inflation.
* Key Takeaway: The market reacted negatively to the perceived lack of dovishness. Bond yields climbed,putting pressure on growth stocks. Investors are now pricing in a higher probability of a delayed rate cut, potentially impacting borrowing costs for businesses and consumers alike.
* Impact on Sectors: Sectors sensitive to interest rates – technology, real estate, and utilities – bore the brunt of the sell-off.Conversely, financials saw a modest boost as higher rates typically improve net interest margins.
* Monitoring Inflation Data: Future Fed decisions will heavily rely on incoming economic data, notably inflation reports. The Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) price index will be closely watched in the coming months.
Tech Earnings: Mixed Bag and Market Reactions
Big Tech earnings painted a mixed picture. While some companies exceeded expectations, others disappointed, contributing to the overall market uncertainty.The focus shifted from revenue growth to profitability and cost management.
* Microsoft & Amazon: Both companies delivered solid results, showcasing resilience in their cloud computing businesses (Azure and AWS, respectively). This positive performance offered some support to the broader tech sector.
* Alphabet (Google): Alphabet’s earnings were generally well-received, but concerns remain regarding increasing competition in the AI space.
* Meta (Facebook): Meta continued its recovery, driven by advertising revenue and cost-cutting measures. However, regulatory scrutiny remains a persistent headwind.
* Earnings Season Outlook: The current earnings season is expected to provide further clarity on the health of the corporate sector and the overall economy.Investors are scrutinizing guidance for the next quarter, looking for signs of a potential slowdown.
Shutdown Showdown: Political Risk and Economic Uncertainty
The looming government shutdown deadline added another layer of complexity to the market. While temporary funding extensions are possible, the risk of a prolonged shutdown remains a concern.
* Potential Economic Consequences: A shutdown could disrupt government services, delay economic data releases, and negatively impact consumer confidence.
* Market Sensitivity: The market generally dislikes political uncertainty. A shutdown could exacerbate existing volatility and weigh on investor sentiment.
* Historical Precedent: Past government shutdowns have typically resulted in short-term market declines, although the long-term impact has been less pronounced.
Apple: A Buy Opportunity amidst Volatility
Despite the broader market headwinds, we maintain a ‘Buy’ rating on Apple (AAPL).Several factors support this outlook:
* Strong Brand Loyalty: Apple continues to benefit from its incredibly strong brand loyalty and ecosystem.
* Innovation Pipeline: The company is expected to unveil new products and services in the coming months, including advancements in augmented reality (AR) and virtual reality (VR).
* Services Growth: Apple’s services business (Apple TV+,Apple Music,iCloud) is a key growth driver,providing recurring revenue and higher margins.
* Valuation: While not cheap, Apple’s valuation appears reasonable given its strong fundamentals and growth prospects. The recent dip presents a potential buying opportunity.
* Case Study: iPhone 15 Demand: Initial reports suggest strong demand for the iPhone 15, particularly the Pro models, indicating continued consumer appetite for Apple’s flagship product.
Starbucks: A Sell Recommendation – Challenges Brewing
Conversely, we are downgrading Starbucks (SBUX) to ‘Sell’. The company faces several challenges that could weigh on its performance:
* China Slowdown: Starbucks’ growth in China, a key market, has slowed significantly
