With equity markets continuing their exuberance, and investors shrugging off the negative impact of an escalating trade war, US benchmark indices last week reached new highs. It seems there’s little that can stop this remarkable bull run.
Nevertheless, some of the world’s biggest companies have been cautioning of the negative effects of the new US tariffs on Chinese imports. Walmart (NYSE:WMT), the world’s largest retailer, has reportedly warned the US Trade Representative, Robert Lighthizer, in a letter, that the big-box retailer may have to raise prices to combat tariff costs.That letter is the most recent red flag, following similar concerns expressed by other large multinationals, including Apple (NASDAQ:AAPL), Target (NYSE:TGT), and Samsonite International (OTC:SMSEY).
In addition to the roiling trade spat, in the coming week investor focus will shift to the Federal Reserve’s interest rate decision on Wednesday, for which the market consensus expects another quarter-point rate hike in an economy experiencing the strongest job growth in 49 years. Investors should watch for the Fed’s assessment of the health of the US economy, inflationary pressures, and the impact of the trade war between the US and China.
As a potentially busy week commences, here are three stocks that could see some price action in the coming week:
Nike, (NYSE:NKE), the Beaverton, Oregon-based manufacturer of athletic footwear, clothing and accessories, is expected to release financial results for fiscal Q1 2019 on Tuesday, after the market close. The consensus EPS for the quarter is $0.53 a share, according to Reuters’ estimate of analysts’ forecasts.
Judging by its sales momentum in the US, there is a good chance that the sportswear giant will beat analyst expectations. Trading just a hair below its record high of $86.04, Nike shares closed on Friday at $85.55. The stock is up more than 60% in the past year, proving it’s one of the best dividend stocks to own in this bull market.
The biggest sign that the company is on the right track to deliver superior returns is the revival of its sales growth in North America. After three quarters during which US sales contracted, the company reversed that trend in the second quarter as consumers flocked back to malls, encouraged by a strong economy, tax cuts and rising wages.
This positive reversal in the domestic market comes at a time when Nike remains a powerful brand overseas, from where the company generates more than half its revenue. Still, with most of these expectations already priced in, it’s unlikely that Nike shares will see a big jump even if it beats on expectations.
2. Conagra Brands
The Chicago-based frozen food giant will report its fiscal 2019 first-quarter earnings on Thursday, before the market opens. Analysts expect $0.56 a share earnings for the period ended August 31, according to Reuters’ estimates.
The latest earnings for Conagra Brands (NYSE:CAG) will be keenly watched by investors after the retailer announced a $8.1-billion cash and stock deal to buy Pinnacle Foods (NYSE:PF) this past June, betting big on the revival of frozen food demand. Investors, however weren’t so thrilled.
They sent Conagra stock tumbling the day it announced the deal, on concerns that the purchase was too expensive even as it bolsters Conagra’s footprint in the freezer-aisle with brands such as Birds Eye. After the June plunge, the stock remains highly volatile. Shares closed Friday at $37.45.
If there’s any sign of weakness in its frozen food segment, during the report, expect another sell-off. It’s going to be tough for Conagra to justify the price it paid for the Pinnacle deal.
Keep an eye on the most speculative segment of the market. That’s where British Columbia-based medical marijuana company Tilray (NASDAQ:TLRY) gave investors a roller coaster ride filled with highs and lows of great magnitude during the past week.
TLRY 300 Minute Chart
In a classic boom-and-bust cycle, shares closed at $123 on Friday, trading more than 50% below where they hit on Wednesday, at a record $300 per share for the stock, after CEO, Brendan Kennedy, told CNBC that investment in cannabis companies “is a global opportunity.”
His remarks were driven by Tilray having gained approval, just a day earlier, from the US Drug Enforcement Administration to import medical cannabis into the US for testing purposes. Investor interest in marijuana companies has also swelled ahead of Canada’s legalization of recreational cannabis use next month.
The latest investor frenzy was fueled by Constellation Brands (NYSE:NYSE:STZ), the maker of Corona beer, when it announced a $3.8 billion investment in Canopy Growth (NYSE:CGC) last month, signaling that global players also see value in this growing segment of the market.
If the sell-off in Tilray accelerates during the coming week, it may vindicate investor apprehension that the sector is in a bubble territory. That could be a heads-up that a big correction could be on the way.