By Barbara Kollmeyer
What’s at stake for stock markets this week? A lot, where tech is concerned.
“There will 164 S&P 500 members collectively representing 47% of the S&P 500’s market capitalization reporting earnings,” JonesTrading’s chief strategist Michael O’Rourke reminds us.
Facebook rolls out with results Monday, followed by Twitter , Microsoft /zigman2/quotes/207732364/composite MSFT -0.31% and Alphabet /zigman2/quotes/202490156/lastsale GOOGL -7.68% on Tuesday, and Apple /zigman2/quotes/202934861/composite AAPL -1.77% and Amazon /zigman2/quotes/210331248/composite AMZN -2.02% on Thursday. Investors are eager to see just how much damage Apple’s privacy changes have done to advertising revenue, specifically for Facebook .
Clearly all of the above could be heavily influential when it comes to overall direction for stocks, but our call of the day from Matt Maley, chief market strategist at Miller Tabak + Co., flags another sector he sees as overlooked and looking up.
After getting heavily oversold at the start of October, healthcare stocks have begun to show promise, Maley said. The Health Care Select Sector SPDR ETF /zigman2/quotes/205918244/composite XLV -0.29% has tested the key $125 level several times, and has begun to bounce off that, he told clients in a note.
“The bounce over the past couple of weeks has given it a minor ‘higher-low/higher-high’ sequence…AND it has also taken the XLV above its short-term trend line from early September, so this is a positive development,” he said.
While it’s a bit too early to “send a major green flag up the flagpole,” Maley said there’s no question that with a bit more upside follow-through, “it’s going to be very bullish for the healthcare sector as we move toward the end of the year.”
Here’s his chart showing a positive cross on XLV’s moving average convergence divergence — a trend-following momentum indicator .
Every positive cross on that MACD chart has been following by a strong sector rally, he noted. “Therefore if we do get any upside follow-through, this sector should be one that does VERY well over the last 2.5 months of the year.”
As for specific stocks, he likes Amgen /zigman2/quotes/209157011/composite AMGN -1.56% , which he noted recently dipped below its 200-week moving average. The four other times in the past decade this has happened, Amgen has swiftly recovered and rallied. And now it’s close to testing that line again, he said.
There’s another reason the healthcare sector could see some extra momentum.
Maley said institutional investors who need to play end-year catch-up will often turn to groups of stocks that lagged behind most of the year, then turned higher. If healthcare starts to fit that bill, then extra buying from those big players could deliver an “outsize” impact on the sector, he said.
Apart from tech earnings, investors will get results this week from 3M /zigman2/quotes/205029460/composite MMM -1.41% , General Electric /zigman2/quotes/208495069/composite GE -0.18% , Boeing /zigman2/quotes/208579720/composite BA -0.59% , McDonald’s /zigman2/quotes/203508018/composite MCD -1.69% , Coca-Cola /zigman2/quotes/209159848/composite KO -0.58% and Caterpillar /zigman2/quotes/203434128/composite CAT -0.32% , to name a few.
A new Facebook whistleblower has reportedly emerged and told U.S. regulators that one company official brushed aside hate-speech concerns in 2017. Also, Facebook has been losing teen users, says a Bloomberg report .
PayPal /zigman2/quotes/208054269/composite PYPL -4.22% shares are surging and Pinterest’s /zigman2/quotes/211319641/composite PINS -2.16% are tumbling after the payments giant said there is no deal in the works for the social-media platform, after speculation of a multibillion-dollar tie-up.