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Weekly Market Review: Stocks Gain Ahead of Earnings, Inflation Reports

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Our weekly review of the market. U.S. stocks were mixed on Friday and the S&P 500 added about 2% last week. Our Stock of the Week is a Technology name.

U.S. stocks were mixed on Friday and the S&P 500 added about 2% last week, following a holiday on Monday.

The Institute for Supply Management posted solid Services data for June on Wednesday. Later that day, the minutes of the latest FOMC meeting suggested that the Federal Reserve could continue to increase interest rates later this year.

On Friday, the U.S. June jobs report showed the addition of 372,000 non-farm payrolls, which surpassed expectations. The headline unemployment rate remained at 3.6%.

The Week Ahead

Earnings Season kicks off this week, beginning with Pepsico (PEP) on Tuesday. JP Morgan Chase (JPM) and Morgan Stanley (MS) are due out Thursday, followed by UnitedHealth (UNH) and Wells Fargo (WFC) a day later.

Aggregate S&P 500 profit is expected to grow just 5.7% in the second quarter, or actually show a 3% decline, excluding the Energy sector. Financial names are expected to post the largest earnings decline in the period.

On the economic front, inflation data will be back in focus, beginning with consumer prices (CPI) on Wednesday. Excluding food and energy, core growth is expected to show 5.8% growth for June.

A day later, producer prices (PPI) are predicted to demonstrate an 8.3% core increase last month. The preliminary July Univ. of Michigan consumer sentiment survey on Friday also contains a key inflation component.

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: Alpha and Omega (AOSL)

The company makes power semiconductors for a wide range of customers.

The stock gained 15% last week and is showing signs that it has the potential to continue this relative outperformance into the second half of 2022. Here’s why:

The global chip business has been in turmoil, as supply issues continue to linger from the early days of the Coronavirus pandemic. That said, Alpha and Omega offered investors a glimmer of hope in May, when it delivered better-than-expected quarterly results.

The company earned $1.34 a share in the March quarter, as revenue increased 20% from a year ago, to $203.2 million. Upside in the period was driven by an improved product mix that boosted margins.

At current levels, Alpha and Omega appears to offer growth at a reasonable price. The stock is changing hands for 6.6x expected profit over the next four quarters, when management is predicted to deliver 33% average annual earnings growth for the next three to five years.

Wall Street agrees that the company holds value. The average price target of two active analysts tracked by TipRanks is $56, which reflects 61.4% upside potential.

In the meantime, the company carries an “Outperform” Smart Score of 10/10 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 insider buying, in addition to 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.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >

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