U.S. stock markets will have a big test of their resilience next week when some of the largest global companies release second-quarter earnings.
The S&P 500 and the Nasdaq Composite posted their worst numbers since May last week as investors confronted soft quarterly results, a lingering trade war with China and uncertainty over the scope of the Federal Reserves’ next interest-rate move.
S&P 500 earnings are expected to decline 2.9% for the second quarter according to FactSet. Of 114 companies that issued guidance for the quarter, 77% released negative forecasts, FactSet research says.
For the coming week, the following three stocks should provide investors with a good idea of how the different sectors of the economy are performing.
1. Tesla
Electric car-maker Tesla (NASDAQ:TSLA), will report second-quarter earnings on Wednesday after the market close. The consensus forecast is for the company to produce a per share loss of $0.41 on sales of $6.52 billion.
Investors got some good news this month with the company announcing a record number of deliveries. Tesla said it shipped 95,200 cars in the second quarter, beating the previous company record of 90,700 in the fourth quarter of 2018.
Despite that positive news, it’s not clear that Tesla will be able to show a path to profitability when it announces Q2 earnings. After years as a market darling, Tesla’s share price tumbled more than 40% this year until June on concerns that slowing demand for its cars will squeeze the company’s already tight cash position.
But Tesla shares have started to regain some of their luster, gaining 46% since June on hopes that record deliveries will improve profitability and that the company has likely raised enough cash to make it through 2020. Tesla stock finished the trading at $258.18 on Friday.
2. Facebook
Facebook (NASDAQ:FB) is another top technology stock that will come under intense scrutiny after it releases its Q2 earnings report on Wednesday. The consensus forecast is for the social media giant to report $1.87 a share profit on sales of $16.5 billion.
This year's powerful rally is sending a strong message that advertisers still love the social network service, even though it’s going through one of the toughest times in its history as politicians and regulators probe the company’s platform for misuse.
Shares have surged some 50% since the start of 2019, to close Friday at $198.36. The strong rebound comes after a tumultuous 2018, during which the shares plunged more than 25% amid a variety of high-profile setbacks, including data breaches, user privacy concerns and the political manipulation of its platform.
3. AT&T
AT&T (NYSE:T) also reports Q2 earnings on Wednesday before the market open. The operator is expected to report $0.89 a share in profits on sales of $44.87 billion.
Looking at the share price chart of AT&T, it’s obvious that investors don’t have much faith when it comes to the company’s future earnings. Shares have fallen some 10% during the past two years in a highly volatile trading pattern. The stock, which closed Friday session at $32.79, has staged a comeback this year as falling bond yields attract yield-hungry investors to utility stocks.
AT&T has been rushing to become a modern media giant at a time when consumers are cutting cords and subscribing to cheaper entertainment options, such as Netflix (NASDAQ:NFLX). To survive in this disruptive environment, the company last year acquired Time Warner, which included popular content assets like HBO and CNN, for $85 billion.
But that acquisition ballooned AT&T’s debt and created operational complications. AT&T has $169 billion of net debt and says 75% of the debt it took on to buy Time Warner will be paid off by the end of this year.