U.S. stocks ended the week on a positive note, despite a volatile week, as investors were encouraged by a mild U.S. inflation report that raised hopes for a potential interest rate cut from the Federal Reserve in the coming months.
Although the benchmark and tech-heavy closed lower for the second consecutive week, the outperformed with a gain of 0.8%, marking its fourth straight positive week. Additionally, the small-cap-focused surged 3.5% as investors shifted focus from tech leaders to small caps and cyclicals.
The upcoming week is expected to be eventful, with key market-moving events such as a Fed monetary policy meeting, a closely watched employment report, and a wave of heavyweight tech earnings announcements.
The Federal Reserve is likely to keep interest rates unchanged at its meeting this week, but Fed Chair Jerome Powell’s comments in the post-meeting press conference could provide clues about potential rate cuts in the future. Traders are pricing in a September rate cut and expect two cuts by December.
On the economic calendar, Friday’s U.S. employment report for July will be closely watched, with forecasts indicating a slowdown in job growth compared to June. The earnings season will also be in full swing, with tech giants like Microsoft, Meta Platforms, Apple, and Amazon set to report their latest results.
Looking ahead, I have identified two stocks to watch for the upcoming week:
Stock To Buy: Amazon
I anticipate a strong performance from Amazon this week, as the company is expected to report solid growth in its cloud computing, e-commerce, and advertising businesses. Analysts have raised their EPS forecasts, reflecting growing confidence in Amazon’s financial performance.
Consensus estimates call for Amazon to post earnings per share of $1.02, up 56.9% from the same quarter last year. The company’s focus on innovation and operational efficiency is expected to drive revenue growth.
Amazon’s cloud unit, Amazon Web Services, is a key focus area, as it continues to lead the cloud-computing market. With a near-perfect Financial Health Score and a strong profit outlook, Amazon remains a top pick for investors.
Stock to Sell: PayPal
On the other hand, I see a challenging week ahead for PayPal, as the company’s earnings and guidance are likely to disappoint investors. A slowdown in core e-commerce business and negative consumer spending trends could lead to a breakdown in PayPal’s stock price.
Profit estimates have been revised downward multiple times in recent months, indicating a lack of confidence in PayPal’s financial performance. Traders are pricing in a potential 9.1% move in the stock following the earnings update.
Overall, it is crucial for investors to stay informed about market trends and company performances to make informed decisions about their portfolios. Subscribe to InvestingPro for exclusive insights and analysis to stay ahead of the curve.
PayPal (PYPL) Revenue Rises 7.2% to $7.84 Billion as CEO Alex Chriss Remains Cautious
As the world’s best investment manager and financial market’s journalist, I bring you the latest insights on PayPal’s financial performance. Despite a 7.2% increase in revenue from last year to $7.84 billion, CEO Alex Chriss is expected to adopt a conservative approach for the rest of the year due to the challenging operating environment.
In the past year, PayPal has encountered headwinds like slowing consumer spending, e-commerce trends, and fierce competition in the mobile payments processing industry. With PYPL stock closing at $58.29, near its 2024 low of $55.77, the company’s market cap stands at $61 billion, down 5% year-to-date.
It’s important to note that PayPal has a below average InvestingPro ‘Financial Health’ score, reflecting concerns over earnings growth prospects and free cash flow. Whether you’re a novice investor or a seasoned trader, leveraging InvestingPro can help you navigate investment opportunities while mitigating risks in the current market conditions.
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Disclosure: I hold positions in the S&P 500, SPDR S&P 500 ETF (SPY), Invesco QQQ Trust ETF (QQQ), and Technology Select Sector SPDR ETF (NYSE:). My portfolio is regularly rebalanced based on risk assessment. The views expressed here are my own and not investment advice.
Follow Jesse Cohen on Twitter @JesseCohenInv for more stock market analysis and insights.