Momentum is back even as the battle between positive and negative news cycles rage on. Investors who have been on the sidelines waiting for lower prices are likely disappointed as both the Dow Jones Industrial Average and the S&P 500 index notched their fourth straight week of positive gains. The latter even touched the 4,300 level — something it has not done since August 2022.
Although it was a choppy week, the three major averages booked decent gains, thanks to back-to-back positive trading sessions. The Nasdaq Composite Index has now been positive for seven consecutive weeks — something it has not done since November 2019. In all, two things have become quite clear. The bulls are now in charge of the market. It also appears that the market has finally embraced the current path of the Federal Reserve and decisions regarding inflation and interest rates.
The Dow Jones Industrial Average rose 43.17 points, or 0.13%, to end Friday’s session at 33,876.78. Among the Dow’s notable gainers were Apple (AAPL), Salesforce (CRM), Microsoft (MSFT) and Walt Disney (DIS). The S&P 500 added 4.93 points, or 0.11%, finishing at 4,298.86. It was a broad rally as all eleven S&P sectors finished higher, driven by a 2% rise in Communication Services, Consumer Discretionary and Technology. The tech-heavy Nasdaq Composite gained 20.62 points, or 0.16%, to close at 13,259.14.
The Nasdaq was powered by, among others, a better-than 2.6% rise in shares of Netflix (NFLX) and a 4.06% gain in Tesla (TSLA). Friday’s rally comes on the heels on Thursday’s gains which were driven by positive inflation data and the thought that the Fed may put a pause rate hikes. The market has also had the benefit for several headline risks disappearing including the the likelihood of a recession and more recently a resolution to the debt ceiling. For the week, the Nasdaq was up 0.14% while the Dow was up 0.34%. The S&P was up 0.39%.
The main question heading into the week is whether this recent rally will continue. But with each leg higher, the buying opportunity gets harder to justify. But given the resilience we have witnessed in the economy and labor data, staying invested in the market is the best way to counter inflation. Here are the stocks I’ll be watching this week.
Oracle (ORCL) – Reports after the close, Monday, Jun. 12
Wall Street expects Oracle to earn $1.58 per share on revenue of $13.73 billion. This compares to the year-ago quarter when earnings came to $1.54 per share on revenue of $11.84 billion.
What to watch: Amid the broader rally in technology stocks, shares of Oracle have outperformed the market, rising 31.5% year to date, compared with a 11.84% rise in the S&P 500 index. Meanwhile, over the past year, Oracle has risen more than 50%, far outpacing the 4% rise in the S&P 500 index. The reason for the outperformance is due to a combination of factors, among which is the growing prospects of the Oracle’s cloud ambitions, namely Oracle Cloud Infrastructure (OCI), which is the company’s primary cloud offerings. Designed to be highly secure, reliable, and scalable, OCI offers corporations various cloud computing services such as storage, networking, compute and databases. The primary target is enterprise customers who wants to move their mission-critical workloads to the cloud. Oracle is a distant fourth in the cloud computing market behind Amazon’s Amazon Web Services, Microsoft’s Azure and Alphabet.However, Oracle is gaining some ground. And it’s doing so at a pivotal time when the global cloud computing market is forecasted to grow some 16% in the next three years, rising from $445 billion in 2021 to $947.3 billion by 2026. Currently seen as a transformation play based on its business transition towards a cloud subscription-based model, Oracle on Monday must demonstrate how it can become a future global cloud leader to keep its stock moving in the right direction.
Adobe (ADBE) – Reports after the close, Thursday, Jun. 15
Wall Street expects Adobe to earn $3.79 per share on revenue of $4.77 billion. This compares to the year-ago quarter when earnings came to $3.35 per share on revenue of $4.39 billion.
What to watch: Add Adobe to the list of stocks that have caught a bid on the strong AI-driven momentum. Adobe stock has surged more than 30% over the past month, besting the 4% rise in the S&P 500 index. Its shares are up 33% year to date, while the S&P 500 index has risen 11.84%. And there’s more gains to come, according to Wells Fargo Securities Michael Turrin. Citing generative AI tailwinds, the analyst upgraded Adobe stock to Overweight and boosted Adobe’s 12-month price target from $375 to $525. From current levels of $454, that new price target assumes gains of more than 15%. “The AI debate continues to drive ADBE,” Turrin wrote in a research note. “…[Generative] AI is a tailwind to ADBE as we expect much of the early value to accrue to established platforms and see potential for further break-out as products are monetized.” This past week, Adobe introduced Sensei GenAI, a generative AI tool, which it made available across Adobe Experience Cloud applications for enterprises. Wells Fargo sees Adobe as well-positioned to benefit from early enterprise adoption given its content specialties. Also, unlike other AI rivals, Adobe is attempting to differentiate its AI by focusing on four key areas: data, scale, talent, and a comprehensive portfolio. Its management is taking a strategic approach to position the company for long-term success. While the stock is no longer cheap, Adobe’s new leadership position in AI could keep the shares from crashing.
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