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Weekly Market Review: Rally Ahead of Key Reports

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Our weekly review of the market. U.S. stocks fell on Friday, but the S&P 500 still gained more than 2% for the week. Our Stock of the Week is a Technology name.

U.S. stocks fell on Friday, but the S&P 500 still gained more than 2% for the week. Consumer Discretionary names led the way higher last week, while the Communication Services sector lagged.

Investors digested a fresh wave of earnings reports and prepared themselves for an expected interest rate hike by the end of the month.

In economic activity, the European Central Bank raised interest rates by a half-point on Thursday. Its first increase in 11 years.

Back in the U.S., preliminary purchasing managers’ index (PMI) data showed solid Manufacturing activity in July, but a reading below 50 in the Services sector. The latter indicates a signal of economic contraction. 

The Week Ahead

The pace of earnings reports will continue to increase next week. 172 companies in the S&P 500 are scheduled to post quarterly results. The following names headline the reporting calendar:

July 26: Alphabet (GOOGL), Coca-Cola (KO), Microsoft (MSFT), and Visa (V)

July 27: Boeing (BA) and Meta Platforms (META)

July 28: Amazon.com (AMZN), Apple (AAPL), Intel (INTC), and Pfizer (PFE)

July 29: Exxon Mobil (XOM) and Procter & Gamble (PG)

Aggregate S&P 500 profit is projected to grow just 6.2% in the second quarter or show a 3.2% decline, excluding the Energy sector. Financial names are expected to post the largest earnings drop in the period.

Next week will also be busy on the economic front. U.S. consumer confidence will be released Tuesday, followed by durable goods orders on Wednesday.

Later that day, we’ll also receive the next interest rate decision from the Federal Reserve. Fed funds futures are indicating an 80% probability of another 75 basis-point rate hike, to help battle inflation.

Thursday brings the initial look at second-quarter U.S. GDP, with economists calling for just 0.4% growth. Friday also offers the PCE price index, a key inflation metric used by the Federal Reserve.

Given a slowing growth outlook and the prospect of higher interest rates, it could become hard to come by investment gains in 2022. As a result, deciding what and when to buy can be challenging for any investor. However, the fact remains that investments with upside potential and other positive signals are out there if you dig a little deeper. One such Technology name is worth a closer look and is our Stock of the Week.

Stock of the Week: Autodesk (ADSK)

The company produces 3D design, engineering, and entertainment software.

The stock gained 11% last week. It is showing signs that it has the potential to continue this relative outperformance into the second half of 2022. Here’s why:

Autodesk is carrying solid operating momentum into the back half of the year. This was on display in May, when management delivered better-than-expected quarterly results.

The company earned $1.43 a share in the April quarter, as revenue increased 18% from a year ago, to $1.17 billion. Autodesk expanded margins in the period and also has a 94% recurring revenue base, offering clear visibility for future growth. 

The stock is currently valued at 28.5x expected earnings over the next four quarters, which is a discount to its peers.

Wall Street agrees that Autodesk has upside potential. The average price target of 16 active analysts tracked by TipRanks is $255.36, which is 30.3% higher than present levels.

In the meantime, the company carries an “Outperform” Smart Score of 8/10 on TipRanks. This data-driven stock score is based on 8 key market factors.

On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen improving sentiment from hedge funds and financial bloggers.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio, a weekly newsletter that blends big data, and market insights.

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