After Political Drama, Markets Eye Fed Rate Hike: Investing Action Plan – Investor's Business Daily

Here’s your weekly Investing Action Plan: what you need to know as an investor for the coming week.

Unless ex-FBI Director James Comey makes a surprise appearance on Capitol Hill again next week, investors will shift their gaze to the Federal Reserve’s meeting, where policymakers are widely expected to raise rates for the third time in six months. Meanwhile, the video-game industry will hold its annual trade show with news from Microsoft (MSFT) and Activision Blizzard (ATVI), while lawmakers will debate the Trump administration’s defense budget request, with Lockheed Martin (LMT) and Northrop Grumman (NOC) programs expected to get extra scrutiny.

Stocks To Watch: Dow Components

Apple (AAPL) had been forming a shallow base with a potential buy point at 156.75, but as tech stocks sold off Friday, the iPhone maker tested support at the key 50-day line and closed just above it. If Apple can rebound higher from that level, it could provide an opportunity for existing shareholders to add to their position.

DuPont (DD), which is merging with Dow Chemical (DOW), is trading in buy range from a double-bottom entry at 82.40. This pattern is called a double bottom because it resembles a “W” — the middle peak plus 10 cents is your entry. But volume on Friday’s breakout was about average, and it’s best to see strong buying when a stock clears an entry as that indicates institutional support.

Boeing (BA) remains in buy range from a flat base with a 185.81 entry, but the stock has recently hit some resistance around the 190 level, where Boeing finished on Friday.

Disney (DIS) has fallen 9% from its April 27 peak of 116.10, but shares found support at the 200-day line. Holding above this long-term trend level is key. Disney is working on a base with a buy point that’s 10 cents above that recent high, at 116.20.

After paring much of its gains from an all-time intraday high of 160.86 on May 16, Home Depot (HD) is testing support at its 50-day line. This is a second test of that level after the stock broke out of a cup-with-handle base in late January. When a stock rebounds higher off the 50-day line, that’s an opportunity to add a few shares to your position.

Fed Meeting

Central bankers meet Tuesday and Wednesday with a statement due at 2 p.m. ET Wednesday and a press conference with Fed Chairwoman Janet Yellen scheduled to start at 2:30 p.m. Another quarter-point rate increase to 1%-1.25% is a virtual lock, with the CME Group’s FedWatch Tool putting the odds at more than 99%. The news will be what comes next. In March, Fed members’ projections indicated two more rate hikes in 2017. Will that change? Right now financial markets are on the fence as to whether the Fed will hike again in December.

Markets also may get indications that the Fed will ever so slightly begin to unwind its $4.5 trillion balance sheet before the end of the year. Fed meeting minutes have telegraphed their plan to stop reinvesting a portion of maturing mortgage and Treasury holdings. The Fed appears to be lining up an autumn change in its reinvestment policy, which economists say can be more mild than a rate hike.

Economic Indicators

Before the Fed’s decision, the producer price index for May is due early Tuesday, and the consumer price index is due early Wednesday. Also early Wednesday, data on May retail sales and April business inventories will come out. On Thursday, the industrial production report for May is expected, and June numbers on New York-region manufacturing, mid-Atlantic manufacturing and homebuilder sentiment are due.

Get Your Game On

Three-day video game nirvana E3, otherwise known as the Electronic Entertainment Expo, kicks off Tuesday. Expect a slew of announcements from console makers and publishers like Microsoft, Nintendo (NTDOY), Sony‘s (SNE) PlayStation, Activision Blizzard and others — plus an expanded presence and live streaming by social media and virtual reality pioneer Facebook (FB). Xbox’s Project Scorpio is expected to be the focus on the console side, and gamers will be hungry to demo Activision’s “Call of Duty: WWII” and “Destiny 2” titles. Investor’s Business Daily will have the latest E3 news and product demos right from the show floor as thousands of video game professionals — and this year, members of the public — flock to the Los Angeles Convention Center.

Take That Hill

Defense officials will have to defend a widely panned budget plan on Capitol Hill. On Tuesday, the Senate Armed Services Committee will question Defense Secretary James Mattis and Joint Chiefs Chairman Gen. Joseph Dunford on the fiscal 2018 request, and later that day a subcommittee will grill aviation officials. On Wednesday, the Senate Appropriations defense panel will talk with the Pentagon chiefs. On Thursday, the Senate Armed Services Committee will discuss the Navy’s budget priorities, and also that day Mattis and Dunford will appear before appropriators on the House side. While the White House’s budget proposal has been declared dead on arrival, it still points to the Pentagon’s priorities, and lawmakers tend to be more willing to go along with defense spending requests.

Lockheed’s F-35 will likely get the usual grilling from lawmakers who are uncomfortable with its $400 billion price tag and history of delays, though the program continues to make progress addressing glitches and lowering unit costs. Lawmakers may also dig into Northrop’s B-21 bomber, as the Air Force has been reluctant to reveal too much about its cost while also seeking to avoid a repeat of the B-2 bomber sticker-shock debacle.

Bank Conference Follows Trading Warning

Morgan Stanley (MS) CEO James Gorman, Citigroup (C) CFO John Gerspach and JPMorgan Chase (JPM) community banking chief Gordon Smith will present at the Morgan Stanley Financials Conference on Tuesday and Wednesday. The event, in New York, follows warnings from a variety of banks that quieter market activity seemed likely to bring weaker Q2 trading results – possibly due to the absence of unexpected, market-turning events like Brexit or President Trump’s election. Wells Fargo‘s (WFC) Mary Mack – who took the helm at the company’s retail bank last year shortly before details of the sham-account scandal surfaced from that segment – will also present.

Optical Checkup

Optical components maker Finisar (FNSR) reports fiscal Q4 earnings late Thursday and is expected to report EPS of 51 cents, up 75%, with revenue rising 14%, to $363.8 million. Finisar’s outlook for demand from China will be an earnings call topic. One analyst recently said Finisar has resumed shipping products to Chinese maker of network gear Huawei. Fiber-optic stocks have been volatile in recent months, with worries over demand in China overshadowing strong orders from internet companies upgrading data centers to faster communications.

Oil Data Due Amid Sell-Off

OPEC will release its monthly oil market report on Tuesday and the International Energy Agency will release its monthly report Wednesday. These are the first such reports since the cartel and allies decided to extend to March 2018 their production deal to remove 1.8 million barrels of oil per day from the market. The Energy Information Administration will release weekly U.S. stockpile and production figures on Wednesday and Baker Hughes (BHI) will announce weekly U.S. rig counts Friday.

Deflated Earnings

Analysts expect Kroger‘s (KR) earnings to fall 17% to 58 cents per share when it reports Q1 results Thursday. But sales are seen rising 3.4% to $35.79 billion. Food-price deflation has hurt sales across the grocery industry, while growing online orders from Amazon (AMZN) Fresh are cutting into their business. Amazon recently slashed its Prime membership fees for shoppers receiving food stamps. Meanwhile, analysts say that Kroger, Albertsons and Amazon have emerged as possible buyers for upscale grocer Whole Foods Market (WFM).

Ready To Wear

The Wear Conference promises the intersection of technology and fashion, as engineers, designers, apparel makers and other folks converge in San Francisco for this wearable-technologies fest. Representatives from Facebook, Adidas (ADDYY) and Lululemon Athletica (LULU) will be among the conference’s more high-profile speakers.

Waiting For Godot

J.C. Penney (JCP), Dave & Buster’s (PLAY) are among the 50 top retailers, restaurants and others set to participate at Piper Jaffray’s annual Consumer Conference in New York on Tuesday and Wednesday. The conference will feature panel discussions and other presentations, and comes as both retailers and restaurants have faced disruption from online purchases and vigorous discounting.