The Daily Breakdown takes a look at this week’s agenda, while also taking a closer examination of Microsoft amid a multi-week pullback.
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Weekly Outlook
Markets are starting the week under pressure, with the Nasdaq, S&P 500, and other key indices trading lower in the pre-market as we kick off a holiday-shortened week. There’s plenty to focus on in the days ahead.
Jobs are the main story. With many investors focused on the economy and the Fed, labor data plays a major role in shaping the broader outlook. On Wednesday, we’ll get the monthly JOLTS report, which shows the number of job openings, as well as quits and layoffs.
On Thursday, we’ll get the weekly jobless claims report — a measure of how many people are filing for unemployment — followed by the monthly jobs report on Friday. That report will show how many jobs were added (or lost) last month and will include the updated unemployment rate.
Earnings are still rolling in. Notable reports this week include: Nio (Tuesday), Salesforce (Wednesday), and Lululemon Athletica and Broadcom (Thursday).
A few smaller firms reporting this week include Macy’s, Dollar Tree, GitLab, C3.ai, and DocuSign.
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The Setup — Microsoft
Microsoft stock has done quite well this year, rising more than 20%. After bulls cheered the company’s earnings results, shares rose to all-time highs. Since then though, Microsoft has been pulling back. If we zoom out to the weekly chart, the recent ~10% dip seems pretty orderly.
Last week, MSFT appeared to find short-term support at the rising 10-week moving average and the $500 level. This week, short-term investors will find out whether that observation holds true. If it does, bulls can look for a larger rebound to the upside. If this area fails as support though, more selling pressure could ensue.
Shares currently trade for about 32 times forward earnings. Over the past five years, MSFT’s forward P/E ratio has generally ranged from about 25x on the low end to 36x on the high end.
Options
One downside to MSFT is its share price. Because the stock price is so high, the options prices are high, too. This can make it difficult for investors to approach these companies with options.
In that case, many traders may opt to just trade a few shares of the common stock — and that’s fine. However, one alternative is spreads.
Call spreads and put spreads allow traders to take options trades with a much lower premium than buying the calls outright. In these cases, the maximum risk is the premium paid.
Options aren’t for everyone — especially in these scenarios — but spreads make them more accessible. For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street’s Watching
PEP
Shares of PepsiCo are rallying this morning, up about 5% in pre-market trading on news that activist investor Elliott Investment Management has built a $4 billion stake in the company. As of Friday’s close, PEP stock paid a 3.8% dividend yield. Check out more stats on PepsiCo stock.
KHC
A decade ago, Kraft Heinz merged together as one company. Now, it will split back into two firms as the stock has struggled badly over the years. Despite cost cutting and efficiencies between the two companies, KHC still struggled, while revenue has fallen each year since 2020.
BTC
Bitcoin is up about 1% so far this week, as bulls look for some stability with Bitcoin trading in a key support zone. After pushing to record highs, Bitcoin — along with other key cryptocurrencies — quickly retreated lower. Now investors want to see if and where support comes into play. Check out the chart for BTC.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.
