Immovable object, meet unstoppable force. The Standard & Poor’s 500 index moved ahead nearly 3 percent last week as the “Trump Bump” and the “Santa Claus rally” have seemingly become intertwined. But an unyielding rally of about 6 percent since Donald Trump’s presidential election victory could finally hit a brick wall this week.
Though that isn’t to say it will.
The Federal Open Market Committee meets Tuesday and Wednesday, and it’s widely expected to conclude with the announcement of the first hike in the fed funds rate since December 2015 — which itself was the rate’s first move higher since June 2006.
But if the market does decide to throw a Fed tantrum this week, it’ll be as stereotypical a case of “buy the rumor, sell the news” as you could like. Analysts and experts have been high on a December rate hike for months, and the odds of a rate hike have only increased since the election results and subsequent surge in stocks.
[See: The 25 Best Blue-Chip Stocks to Buy for 2017.]
CME Group’s FedWatch tool — which uses 30-Day Fed Fund futures prices to predict the likelihood of a change in monetary policy — is projecting a nearly 95 percent chance of a rise in interest rates to 50-75 basis points.
Naturally, every investor should have their eyes peeled for the FOMC meeting. But a few earnings reports are also worthy of a spot on your radar:
Adobe Systems Incorporated (ticker: ADBE). Adobe is roughly matching the market this year — which isn’t a bad feat when the market is ahead by more than 10 percent. But it still seems almost criminal considering the year ADBE is having.
When Adobe reported third-quarter earnings back in September, it logged its 10th consecutive quarter of record revenues, not to mention its eighth consecutive quarter of double-digit earnings-per-share growth and its fifth straight quarter of double-digit revenue improvements.
The company’s Marketing Cloud racked up a record $404 million in sales last quarter. But the big news in the past couple of months was an announcement that Adobe would partner with Microsoft Corp. ( MSFT) to power customer engagement via Microsoft Azure and Dynamics 365, as well as Adobe Marketing Cloud.
Meanwhile, Adobe’s Digital Media segment — the largest part of the business that includes the Creative Cloud where Photoshop, InDesign and other software is sold — drove $990 million of Adobe’s $1.46 billion in the third quarter, and is expected to be the primary driver of a record fourth quarter.
[See: 9 Ways to Invest in a Post-Election Market.]
If Adobe manages to beat lofty expectations — which include 22 percent revenue growth to $1.59 billion and 39 percent earnings growth to 86 cents per share — when it reports after the bell Thursday, expect ADBE to spark its own personal Santa Claus rally.
Oracle Corp. (ORCL). Oracle and Adobe are neck and neck so far in 2016, though ORCL’s returns are coming amid much weaker operational performance. Oracle also will be reporting after Thursday’s bell, but those numbers will be drab by comparison.
For its fiscal second quarter, revenues are expected to come in at $9.16 billion — less than 2 percent ahead, which reflects the analysts’ view for Oracle’s whole year. Earnings will actually dip a couple pennies to 61 cents per share.
Growth has been elusive for Oracle thanks to aggressive competition, and as a result, Oracle is making a few shifts. For one, it’s going to transition from selling hardware to a rental system, starting with Cloud@Customer, but expanding to BigData@Customer and Exadata@Customer machines. This could be what gets Oracle on the road to competing with Amazon.com ( AMZN) Amazon Web Services and other infrastructure-as-a-service providers.
Oracle also is trying to grow via acquisition, acquiring domain name system provider Dynamic Network Services in late November, just a couple weeks after it closed on cloud firm Netsuite.
But all that matters for Oracle this week is beating that low, low bar. Expect anything less than a significant upside surprise to send Wall Street packing.
Pier 1 Imports (PIR). While there’s certainly a little bit of justification behind recent bullishness in Pier 1, its 50 percent rally since Election Day might be a touch overdone. And that could spell trouble after the bell Wednesday, when the home goods retailer reports its fiscal third-quarter earnings.
The tangible news came back on Nov. 14, when outgoing president and CEO Alex Smith said the company recorded strong comparable-store sales for October, and as a result, he expects third-quarter results “to be at the high-end of our previously guided ranges for comparable and net sales, merchandise margin, earnings per share and adjusted earnings per share.” Smith, who will step down at the end of this year, made the announcement amid Pier 1’s second-quarter earnings report, which included a fourth consecutive quarter of revenue declines.
That’s actually not expected to change in the third quarter, as Wall Street analysts see a 1.3 percent decline to $466.4 million in sales, as well as a penny drop in profits to 12 cents per share.
Considering that Pier 1 is back to the high end of its trading range for the past year, the company will need a significant beat, or else it can kiss a significant chunk of those gains goodbye.
VeriFone Systems (PAY). The market might be in full bull mode right now, but you’d never know it to look at payment solutions firm VeriFone, which is off more than 40 percent for the year.
While Verifone is America’s top dog in the space and No. 2 in the world, Bloomberg reported in late September that the company’s market share is dwindling, from 16.1 percent globally in 2014 to 13.7 percent last year. Internationally, firms including Fujian Newland Payment Technology Co. and Pax Global Technology are giving PAY a run for its money, according to a Nilson Report analysis on Verifone. Here at home, Square ( SQ) is the name most are familiar with, but even Amazon and PayPal Holdings ( PYPL) have developed readers.
VeriFone’s issues really came home to roost after its second-quarter report. Earnings and revenues missed substantially, its profit forecast for the third quarter was hacked by about 17 percent and the company announced layoffs, resulting in a one-day haircut of 25 percent.
This quarter, analysts are expecting a 40 percent-plus drop in earnings to 29 cents per share on a 10 percent decline in revenues to $461.3 million. Perhaps the only saving grace is that the bar has been placed on the floor at the same time shares sport a meager price/earnings-growth ratio of 0.3.
[See: 7 of the Best Stocks to Buy for 2017.]
But even with a significant beat and any sort of pop, VeriFone is in trouble.
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Will the Fed Raise Interest Rates This Week? originally appeared on usnews.com
