Wall Street posts three-week losing streak as Iran war batters sentiment
- Middle East tensions, U.S. inflation data, Oracle and Adobe earnings will be in focus in the week ahead.
- Adobe is well-positioned to beat low expectations and provide the confident outlook needed to reclaim its upward momentum.
- Lennar appears poised for potential downside as housing market weakness drags into its own results.
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U.S. stocks tumbled on Friday and the VIX spiked as oil prices soared amid the ongoing U.S.-Iran war and traders reacted to a lousy monthly jobs report.
Source: Investing.com
All the major indexes posted steep weekly declines, with the 30-stock Dow Jones Industrial Average falling 3%, the benchmark S&P 500 dropping 2%, while the tech-heavy Nasdaq Composite lost 1.2%, and the small-cap Russell 2000 plunged 4%.
The coming week will once again revolve around developments in the Middle East and oil prices as the conflict showed no signs of diminishing as of Sunday morning.
Besides geopolitical worries, a new inflation report will arrive in the week ahead. The consumer price index for February, out Wednesday, is expected to show a moderate 0.2% increase in core prices. The core PCE price index, which is the Fed’s favorite inflation gauge, will also be closely watched on Friday.
Source: Investing.com
Elsewhere, earnings and guidance from software names Oracle and Adobe could update the status of investors’ AI bubble fears. A late season surge of retailers, including Dollar General, Kohl’s, and Ulta Beauty, also report as the Q4 season draws to a close.
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, March 9 – March 13.
Stock to Buy: Adobe
Adobe enters its earnings report with expectations tempered after a period of weakness across the software sector. This sets the stage for a classic "better-than-feared" rally, making it the stock to buy this week.
Analyst sentiment has been notably positive heading into the print, with profit estimates revised upward 23 times, compared to just one downward revision, as per InvestingPro. According to the options market, traders are pricing in a sharp swing of +/-9% in either direction for ADBE stock following the print.
Source: InvestingPro
Adobe is set to deliver its fiscal Q1 report on Thursday after the close. Consensus estimates call for adjusted profit of $5.86 per share, up 15% year-over-year, with revenue forecast to climb 10% to $6.28 billion.
More importantly, management is likely to provide guidance that alleviates market concerns over competitive pressures from generative AI and slowing digital media growth. Recent commentary suggests Adobe’s ongoing integration of AI features across its Creative Cloud and Document Cloud suites is beginning to resonate with enterprise customers, potentially stabilizing net new annual recurring revenue.
After a period of pressure from AI disruption concerns, shares have shown signs of stabilization and even upward momentum in recent sessions as investors position ahead of the report.
Source: Investing.com
Technically, short-term momentum for ADBE is heating up. On the 1-hour chart, nearly every major indicator—RSI, MACD, Stochastics, and most moving averages—are flashing "strong buy." Even the Average Directional Index (ADX) at 28.8 signals a strengthening trend.
If Adobe delivers better-than-feared earnings and provides reassuring or upbeat guidance—particularly on AI adoption and sustained subscription momentum—the stock could see a meaningful post-earnings rally.
Trade Setup:
- Entry: Around current levels (~$283-$284)
- Exit Target: $310 (gain ~9.5%)
- Stop-Loss: $270 (risk ~4.6%)
Stock To Sell: Lennar
In stark contrast, homebuilder Lennar is staring down a difficult week as it prepares to report earnings amidst renewed softness in the housing market. The company’s fiscal Q1 update is scheduled to come out on Thursday after the closing bell.
Analysts have grown increasingly cautious on LEN ahead of the print, with all seven of the latest revisions being made to the downside. The options markets is pricing in a potential +/-4.4% move for LEN stock post-earnings.
Source: InvestingPro
Lennar is seen earning $0.95 per share, representing a 55% decline from the prior year. Meanwhile, revenue is forecast to fall 10% annually to $6.8 billion, reflecting ongoing headwinds in the sector.
The housing market continues to exhibit softness, driven by affordability issues, elevated mortgage rates, and cautious buyer sentiment, leading to pressures such as price cuts and slower demand.
Recent reports indicate that homebuilders have resorted to aggressive pricing strategies to stimulate orders, which has impacted margins, backlog, and overall profitability.
Source: Investing.com
LEN stock just posted an 11.5% drop in the past week and is trading near its 52-week low at $101.17, with nearly every moving average in sell mode. This severe downside momentum is reinforced by a high ADX (59.4), which means the current trend is strong—and that trend is down.
With earnings looming and sector headwinds, any bounce risks being short-lived unless new buyers step in. If Lennar signals that demand is softening again or that margins will remain under pressure as the company prioritizes volumes over price, the stock could struggle.
Trade Setup:
- Entry: Around current levels ($101)
- Exit Target: $92 (gain ~9%)
- Stop-Loss: $107 (risk ~6%)
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Disclosure: This is not financial advice. Always conduct your own research.
At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF. I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.