Recessionary fears are back and with it, investor terrors which triggered last week's equity market selloff. As the trading week came to a close, the U.S. Treasury yield curve inverted on signs of a slowing global economy.
On Friday, the yield on U.S. 3-month Treasurys surpassed the return on 10-year notes, resulting in the S&P 500 finishing its worst day since January, while the Dow Jones Industrial Average erased 459 points.
These developments coincide with signs that global growth momentum continues to slow in many major economies, raising doubts about the sustainability of the latest bull-run in the U.S. equity markets. Against this negative macro backdrop, the following three stocks have company-specific events scheduled which could set their trading direction in the week to come:
1. Apple
Ahead of its new product launch on Monday, March 25, Apple (NASDAQ:AAPL) shares have gained some momentum, raising expectations that the iPhone maker will find a way to excite investors amid slowing sales of its flagship product.
During the past one month, the stock has gained more than 10%, reaching $191, after tumbling from a record high of $233.47 during October 2018.
Among the company's widely anticipated moves is an entry into the video-streaming market, currently dominated by Netflix (NASDAQ:NFLX). Apple may offer details at tomorrow's event on how its much awaited video and news subscription offering will differ, or add value, in a market where it will soon be competing with some big media companies.
Reports from Bloomberg news, released last month, indicate the video service is similar to Amazon's (NASDAQ:AMZN) Prime Video and Netflix products, and will include TV shows and movies either acquired or funded by Apple.
Despite investor optimism, we don’t think a video-streaming service from Apple will have any immediate, short-term impact that could change the company’s financial outlook. As we recently pointed out when discussing Netflix, this market is becoming crowded. As well, it won't be easy to challenge Netflix' dominance in this segment unless Apple comes up with something really big.
2. Cronos Group
Canada-based Cronos Group (NASDAQ:CRON), which invests in medical marijuana ventures, and in which Altria Group (NYSE:MO) recently bought a 45% stake, will report fourth quarter earnings on Tuesday, March 25 before the market opens.
Leading cannabis producers are coming under increased investor security after Canada’s legalization hype and some major deal activity last year. Now these growth stocks have to quickly show that their rich valuations are justified, which would happen primarily through earnings and revenue expansion as well as via proving they're in a position to execute their marketing strategies as demand for medical and recreational marijuana increases.
Cronos, which offers medical marijuana and cultivates cannabis oil, saw its shares surge over 85% since late last year, to trade at $19.23 on Friday. On average, analysts are expecing a loss of one Canadian cent on sales that likely surged more than 500% to C$7.78 million in the fourth quarter.
Altria's December announcement that it will pay $1.8 billion to Cronos to acquire a major stake in the pot-focused group allows both companies to use their strengths to design vaporizers for cannabis use, according to Cronos CEO Michael Gorenstein. Vaporizers are one of the fastest growing product segments in Colorado and California, where pot is legal, and a vaping device is a priority for both companies.
3. Foot Locker
The sports apparel chain, Foot Locker (NYSE:FL) will be hosting an analyst meeting on Thursday, March 28. The meeting could give some insight into consumer spending patterns after the company beat analysts’ same-store sales and profit estimates in its earnings report earlier this month.
The company is the largest U.S. athletic-shoe chain so any insight it offers on consumer demand may also impact other retailers. Nike (NYSE:NKE) shares lost more than 6% on Friday after the world’s largest sportswear company missed on North American sales’ expectations.
Conversely, shares of Foot Locker, trading at $56.91 as of Friday's close, have gained about 17% in the past three months. The company reported a 9.7% jump in comparable-store sales in the fourth quarter on March 1, more than twice what analysts had predicted. Earnings per share of $1.56 also topped projections which were expected to come in at $1.40.