Stock Market Action Plan: Salesforce, Broadcom Earnings, May Payrolls

A mixed week for the stock market left the confirmed uptrend intact heading into the three-day Memorial Day weekend. Markets are closed on Monday, meaning there are only two trading days left in May — not to mention the deadline for the federal debt ceiling negotiations. Investors will be keeping an eye on the Labor Department salary report on Friday, as well as Dow Jones heavyweight earnings Salesforce. com (CRM) and fabless chip giant Broadcom (AVGO). Debt ceiling talks will continue to take center stage, and a deal reached during the week or talks stalled is very likely to impact market behavior.

Stocks to watch: five stocks near buying points

Leadership has been narrow in the stock market’s confirmed uptrend, but a number of stocks are doing well. That’s particularly in the chip and software spaces, which just got a boost over the past week Nvidia‘s (NVDA) earnings report. Arista Networks (ANET) and Mobile (MBLY) are flashing early entries after breaking badly on earnings several weeks ago. Monolithic energy systems (MPWR) also surged past early AI chip buzz entries, though a break could be constructive. Distributor of health products McKesson (MCK) has formed a short stipe on a seven-month cup base. And a three-week advance has been waived Smart sheet (SMAR) to just below a buy point with earnings ahead.

Econ calendar:

With markets betting on a rate hike at the June 13-14 Fed meeting following higher-than-expected inflation in April, the stakes are really high for Friday’s jobs report at 8:30am ET. Economists predict an increase of 180,000 jobs in the payroll report, while the unemployment rate rises to 3.5%. Wage growth is up 0.4%, which is still too hot for the Fed.

Key Fed inflation is rising, increasing the likelihood of rate hikes; The S&P 500 is shaking it off

The Department of Labor’s job and labor turnover survey will be published on Wednesday at 10 a.m. It will provide important indications of how tight the labor market is. Another dip in job vacancies would be good news for the Fed, but economists expect an increase.

The Fed’s Beige Book survey, to be released Wednesday at 2 p.m., will provide an anecdotal update on economic conditions across the country. Evidence of tighter credit conditions amid bank turmoil could bring the Fed to a halt. The Institute for Supply Management’s manufacturing survey index, to be released at 10 a.m. Thursday, is expected to indicate activity in the manufacturing sector has declined for a sixth consecutive month.

Stock Market Perspective: The Dow’s Debt Ceiling Funk

The Nasdaq finished strong, adding a fifth consecutive weekly gain. The S&P 500 rebounded into positive territory and is working to close out May with a third straight monthly gain. The Dow is down nearly 3% for the month and its red year to date as it tests support at its 200-day moving average. The question: Can those losses be reversed under a debt ceiling agreement?

Debt ceiling coming down: tax reckoning will cause recession and stock market swoon

Blue Chip Tracker: Salesforce.com earnings

Dow Jones stock Salesforce.com will report Q1 numbers on Wednesday. The April quarter tends to be seasonally weak for the enterprise software maker. And, amid cost cutting spurred by activist investors, analysts forecast earnings per share growth of 64% to $1.61 on revenue growth of 10% to $8.18 billion. Operating margin improvement will be an important metric. Management may comment on further cost cutting as consulting firm Bain scrutinizes Salesforce’s operations. Salesforce’s MuleSoft business rebounded in the January quarter and analysts expect that to continue. Amidst the fuss over generative artificial intelligence, management is likely to comment on AI competitiveness and future plans.

Tech Revenue: Cybersecurity Week

The week ahead will bring a final wave of cybersecurity company earnings reports. The results can be expected from CrowdStrike Holdings (CRWD), SentinelOne (S), Okay (OKTA) and Zscaler (ZS). The IBD Computer-Software Security group ranks 50th out of 197 industry groups IBD tracked. Earnings reports are mixed for cybersecurity companies, with Palo Alto Networks (PANW) and Fortinet (FTNT) exceed expectations while Sustainable Holdings (TENB), Cloud Flame (NET) And Check Point software (CHKP) fell for results. Overall, cybersecurity companies building cloud service platforms, such as Palo Alto, have outperformed. Fortinet is well positioned in an emerging market, software-defined wide area networks or SD-WANs.

CrowdStrike reports May 31. Analysts model 64% EPS growth to 51 cents on revenue growth of 39% to $677 million. Okta also reports May 31. Analysts expect Okta to swing to a profit of 12 cents from a loss of 27 cents a year earlier. Revenue is expected to grow 23% to $511 million.

CrowdStrike rival SentinelOne reports June 1. Analysts expect it to report a loss of 17 cents per share, down from a loss of 21 cents a year earlier. Targets call for a 74% increase in revenue to $136.6 million. Zscaler announced its fiscal third quarter results on May 8 and raised its full fiscal year outlook. Zscaler reports this after the stock market closes on Thursday.

Broadcom revenue up 12%

Chipmaker Broadcom plans to report its fiscal second quarter results late Thursday. Analysts expect Broadcom to earn $10.12 per share, up 12% year-over-year, on $8.7 billion in revenue, up 7%. Broadcom shares are at all-time highs after the company signed a multi-year, multi-billion dollar deal Apple (AAPL) to provide 5G wireless chips. Analysts said the deal is positive as it allays concerns about the sustainability of the company’s business with Apple.

Stock market profit Bullets

Tuesday

Hewlett-Packard Enterprise (HPE) reports fiscal Q2 earnings after market close on Tuesday. Analysts expect the maker of computer servers, networking equipment and data storage devices to report earnings per share of 49 cents, up 11% from a year earlier. Revenue will grow 9% to $7.31 billion, analysts estimate.

PK (HPQ) plans to release its fiscal second quarter results by the end of Tuesday. Analysts expect the PC and printer maker to earn 76 cents a share, down 30% year-over-year, on revenues of $13.1 billion, down 21%. Warren Buffetts Berkshire Hathaway (BRKB) increased its ownership stake in HP to approximately 12% last quarter.

Ambarella (AMBA) will publish its fiscal first quarter results at the end of Tuesday. Wall Street is looking for the computer vision chipmaker to lose 20 cents a share on revenue of $62 million in the period.

Wednesday

C3.AI (AI) will report Q1 on May 31 after the stock market close. Analysts expect the artificial intelligence software maker to report a loss of 12 cents per share, up from a loss of 22 cents a year earlier. Revenue will fall nearly 2% to $71 million, analysts estimate.

PVH (PVH), maker of the clothing brands Tommy Hilfiger and Calvin Klein, will publish Q1 results late Wednesday. Analysts expect stable earnings of $1.94 per share year over year after four quarters of declines. Revenue is relatively flat, reaching $2.13 billion. PVH stock is approaching the buy point of 91.17 for its cup-with-handle base.

Canadian flight simulator company CAE (CAE) will announce fourth-quarter and full-year results late Wednesday. Analysts expect earnings growth to slow to a 17.2% jump to 34 cents a share after two quarters of accelerating earnings. FactSet predicts that sales will increase nearly 25% to $1.19 billion after three-quarters growth of 20% or more. CAE shares trade at the lower end of a flat base with a buy point of 24.42.

Donaldson company (DCI) will report early third quarter financials on Wednesday. Analysts are forecasting earnings growth of 10% to 74 cents per share, while revenue is expected to rise about 2% to $868 million. Donaldson Company earnings grew 15% between 2021 and 2022, and analysts expect another 14% increase to $3.05 per share in 2023. Donaldson’s stock is in a flat base going back to March, trading about 6% below its buy point.

Thursday (early)

Macy’s (M) reports early Thursday. The embattled department store chain is likely to see earnings per share fall by 58% on a 6% drop in sales. That would be the fourth consecutive quarter of profit and revenue declines, with more pain ahead.

Five below (FIVE) earnings are expected to rise for the second quarter in a row ahead of Q1 report late Thursday. FactSet predicts the discounter will post a 6.3% increase in earnings per share to 63 cents, while sales will accelerate for the third straight quarter, rising 13.8% to $728 million. FIVE stock is down nearly 19% from its 2023 peak of 220.19 on April 12.

Thursday (late)

Cooper companies (COO) is set to report its fiscal second quarter results late Thursday. Analysts polled by FactSet expect the contact lens maker to report adjusted earnings of $3.03 per share and $865 million in sales. Earnings would drop 6.5% if sales increase more than 4%. Cooper stock broke out of a cup base in late March and has retreated somewhat, though it remains within a buy zone.

Samsara (IOT) reports Q1 earnings. Analysts expect a loss of 5 cents, the same as a year earlier, and revenue growth of 34% to $191.3 million. Founded in 2015, San Francisco-based Samsara provides sensors and cloud-based software for managing fleets and industrial operations.

Asana (ASAN) reports Q1 results after the stock market close on Thursday. Analysts expect the work management software maker to report a loss of 18 cents per share, up from a loss of 30 cents a year earlier. Revenue will rise 25% to $150.7 million, analysts estimate.

Lululemon Athletica (LULU) reports late Thursday. Wall Street forecasts earnings per share of 32% on revenue growth of 19%. That revenue growth would be the lowest in several quarters, with forecasts calling for further slowing in subsequent quarters. The Canadian seller of leggings and yoga wear was a pandemic winner. But amid recession fears, several retailers are seeing consumers avoiding discretionary items and opting more for everyday essentials. Lululemon has resorted to price cuts. It used to be known as a retailer whose high-end clothing almost never went on sale.