Stocks Pick of The Week - S&P 500 Gains Amid Fed Rate Cut Speculation

July 1, 2024

| Fullerton Research

Stocks Pick of The Week - S&P 500 Gains Amid Fed Rate Cut Speculation">

The S&P 500 posted a small gain as investors anticipated key inflation data, hoping for indications of a potential Federal Reserve interest rate cut. The Dow Jones Industrial Average rose by 36 points and the Nasdaq Composite increased by 0.3%. The 10-year Treasury yield decreased slightly, and US oil prices rose by 1% due to ongoing Israel-Lebanon tensions. These are our stock picks of the week:

NIKE

Nike shares dropped 12% in extended trading after the company reduced its full-year guidance, expecting a 10% sales decline for the current quarter. This adjustment comes amid slower online sales, planned decreases in classic footwear lines, increased macroeconomic uncertainty in Greater China, and uneven consumer trends across its markets. Although Nike's fourth-quarter earnings surpassed expectations, but revenue fell short of estimates.

NKE (H4). Experiencing an 8% gap-down on 22^nd March, this stock is gaining a temporary bullish momentum even though it has not recovered from its peak of 179 USD per share. Take advantage by buying in around 93.00 and taking profit around 98.70.

CISCO

Cisco Systems, a major player in networking and security services, has recently experienced positive performance despite a challenging few years. In its fiscal third quarter, revenue dropped by 13%, but earnings exceeded expectations. The company's stock is down about 7.8% over the past year. With a price-to-earnings ratio of 12.5, Cisco is seen as undervalued compared to other technology stocks.

Cisco is a beneficial investment due to increasing internet traffic driving demand for its networks and anticipates business growth following the $28 billion acquisition of Splunk. Of 28 analysts, 7 recommend buying while 21 suggest holding. The average price target is $53.51, indicating a potential upside of 14%.

CSCO (Daily). In a bearish period since the beginning of this year, the reversal has finally gained some momentum. Based on the 38.2% and 61.8% Fibonacci levels which happen to be supply and demand areas, this stock is expected to break the 47.80 level and aim for the 49.60 level.

STARBUCKS

Starbucks shares are down 17.6% year-to-date and nearly 20% in the last 12 months. Despite weaker-than-expected earnings and revenue last quarter, attributed to falling same-store sales and traffic due to boycotts over its stance on Israel, analyst believes these issues are management's mistakes that will be fixed, possibly with a new CEO.

The stock trades at 22 times forward earnings, which is considered a good value. Of 35 analysts, 14 recommend buying. The average price target is $88.50, suggesting an upside potential of around 11.5%.

SBUX (Daily). Experiencing a 15% gap-down in early May due to fundamental effects, this stock is gaining momentum again. Starbucks is expected to break the resistance level of 83.80 before reaching its first target of 89.00.