Markets remain hostage to the U.S.-China trade uncertainty, with little hope of a resolution anytime soon. The S&P 500 fell 1.1% over the last five trading days as the benchmark pared its third quarter gains to about half a percent.
Stocks were also pressured by the start of the U.S. House of Representative's newly opened impeachment inquiry of President Donald Trump, a political development that will add a new layer of uncertainty to volatile trading conditions.
Beyond these macroeconomic events, we're watching three largecap stocks which could see some action this week, the result of company-specific developments in the days ahead:
1. PepsiCo
Snack and beverage giant PepsiCo (NASDAQ:PEP) will report third quarter earnings on Thursday, Oct. 3 before the market opens. Analysts expect EPS of $1.5 a share on revenue of $16.93 billion.
The upcoming quarterly report could provide additional evidence that Pepsi’s earnings momentum is backed by a strong demand revival and the success of the company’s product mix which includes such popular brands as Frito-Lay, Tostitos and Ruffles brand chips and Mountain Dew's energy fuel carbonated beverage line, a favorite among gamers. In the previous quarter, the demand for the soft dring giant’s caffeine-boosted drink, aimed at video-gamers, was so strong that the company couldn’t keep its re-sealable cap in stock.
A positive earnings surprise would help Pepsi shares outperform rivals as the stock continues its strong upward move, which began during the past year. Shares closed on Friday at $135.60, having gained more than 20% this year so far.
2. Costco Wholesale (NASDAQ:COST)
The retail sector will come under scrutiny once again when Costco Wholesale (NASDAQ:COST) reports its fiscal 2019 fourth quarter results on Thursday, Oct. 3, after the close. Analysts are expecting $2.54 a share in profit on sales of $47.48 billion.
Unlike the weak showing by some top retailers during their recently concluded quarters, chances are that Costco (NASDAQ:COST) will provide a strong report. The company said last month that its August same-store sales were strong, exceeding analyst estimates.
The company’s future guidance will be more important for investors, at a time when cost pressures are rising because of the U.S.-China tariff hikes that have started to pinch retailers who import products from China.
As well, there is growing evidence from recent economic reports that the U.S. economy is losing some steam. If that slowdown persists, it could hurt consumer sentiment as the year progresses.
So far, however, shares of Costco (NASDAQ:COST) have remained an investor favorite. The stock closed at $285.95 on Friday, up around 40% thus far this year.
3. Alibaba (NYSE:BABA)
It looks as though the U.S.-China trade spat will continue to weigh on Chinese tech stocks listed on the NASDAQ, in the wake of reports that the White House is considering ways to limit U.S. investments in China.
According to a CNBC report, the White House could include a block on all U.S. financial investments in China with the goal to protect American investors. No decisions have been made at this time, however, and it’s nowhere near complete, sources told the network.
But the report was enough to trigger a sell-off in Chinese stocks led by Alibaba Group Holdings (NYSE:BABA) which dropped more than 5% on Friday. That weakness, in our view, could extend in the coming weeks unless we there's a positive outcome to trade negotiations.
The report appears to be a pressure tactic by U.S. officials before October's crucial trade talks with China. The resulting equity weakness could offer a buying opportunity in some of our favorite stocks, including Alibaba (NYSE:BABA). After closing at $165.98 on Friday, shares are up 19% for the year.