U.S. stocks closed sharply higher on Friday, as Wall Street recovered following a rough start to the new year. Even so, all three indexes posted modest declines for the week, with the S&P 500 logging its third weekly loss in four.
For the week, the blue-chip Dow Jones Industrial Average fell 0.6%, the benchmark S&P 500 dipped about 0.5%, while the tech-heavy Nasdaq Composite lost 0.5%.
Source: Investing.com
The first full week of 2025 is expected to be an eventful one as investors continue to assess the Fed’s outlook for interest rates. The U.S. stock markets will be closed Thursday to honor former President Jimmy Carter.
Most important on the economic calendar will be Friday’s U.S. employment report for December, which is forecast to show the economy added 154,000 positions. The unemployment rate is seen holding steady at 4.2%.
Source: Investing.com
That will be accompanied by the minutes of the Federal Reserve’s December FOMC meeting. Expectations for a January rate cut have diminished lately, with the likelihood now at 11%, according to Investing.com’s Fed Monitor Tool.
Elsewhere, on the earnings docket, there are just a handful of corporate results due, including Delta Air Lines (NYSE:DAL), Walgreens Boots Alliance (NASDAQ:WBA), KB Home (NYSE:KBH), and Constellation Brands (NYSE:STZ).
Meanwhile, the Consumer Electronics Show will take place in Las Vegas from Tuesday to Friday. All eyes will be on Nvidia (NASDAQ:NVDA) CEO Jensen Huang for his CES 2025 keynote address on Monday night.
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, January 6 – Friday, January 10.
Advanced Micro Devices (NASDAQ:AMD) stands out as a compelling buy this week, with the upcoming 2025 Consumer Electronics Show (CES) serving as a major catalyst.
AMD stock ended Friday’s session at $125.37. The Santa Clara, California-based semiconductor company has a market cap of $203.4 billion at its current valuation. Shares gained 3.8% to start 2025 after suffering an annual loss of roughly 18% in 2024.
Source: Investing.com
AMD is gearing up for a major showcase at the CES 2025 tech conference in Las Vegas, at which it is expected to reveal its next-generation GPU.
The company is scheduled to hold a press event on Monday at 2:00PM EST, with Senior Vice President and General Manager of the Computing and Graphics Group Jack Huynh likely to show off the company’s RDNA 4 graphics cards.
Other members of AMD’s leadership team are also expected to unveil new products geared towards the PC space, artificial intelligence and automotive, according to the company’s website.
In the past, AMD shares tend to rally during the week of its major product presentations. The chipmaker has a has a strong track record of receiving several analyst upgrades following its product launches.
Source: InvestingPro
As InvestingPro points out, AMD is undervalued, and analysts maintain a strong buy rating, supported by its upbeat profitability outlook and strong sales growth prospects thanks to the buzz around its next-gen AI products.
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In stark contrast, Constellation Brands faces a challenging outlook ahead of its fiscal Q3 earnings report, which is expected to show minimal growth in both revenue and EPS.
Despite the strength of its Corona and Modelo beer brands, the wine and spirits segments are under pressure due to shifting consumer preferences and a tougher macroeconomic environment.
The Rochester, New York-based beverage company is scheduled to report its quarterly update before the stock market opens on Friday at 7:30AM ET. Analysts have recently reduced their earnings and revenue forecasts, citing soft consumer demand and a challenging outlook.
Source: InvestingPro
Constellation Brands is seen earning $3.32 per share, increasing just 2.4% from EPS of $3.24 in the year-ago period. Meanwhile, revenue is forecast to inch up 2.8% year-over-year to $2.54 billion, as strong beer sales outweigh a downbeat performance across its wine and spirits business.
With limited near-term catalysts and a cautious outlook, Constellation Brands might underperform, making it a stock to avoid for now.
Traders are bracing for post-earnings volatility, with options markets pricing in a 4.2% move. Given the headwinds in Constellation’s non-beer segments and underwhelming growth expectations, the stock appears vulnerable to further downside.
STZ stock ended Friday’s session at $221.92, not far from its lowest level since April 2023. At its current valuation, Constellation Brands has a market cap of $40.3 billion, making it the second largest beverage wineries and distilleries company in the world after Diageo (LON:DGE). Shares have been down 8% over the last 12 months.
Source: Investing.com
It should be noted that Constellation Brands currently has a below average InvestingPro Financial Health Score of 2.3 out of 5.0, highlighting concerns over its short-term outlook for profitability and its high revenue valuation multiple.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I am also long on the Invesco Top QQQ ETF (QBIG), Invesco S&P 500 Equal Weight ETF (RSP), and VanEck Vectors Semiconductor ETF (SMH).
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.
