Ahead of the holiday-shortened trading week, with US markets closed on Monday for the Independence Day/July 4 holiday, investors are likely to shift their focus back to the pandemic after reports that the Delta variant is causing infections to spike again globally. The rapidly spreading COVID variant is also threatening the economic recovery which is so important for cyclical stocks.
The “hyper-transmissible” version of the coronavirus may eclipse other virus mutations in the US within weeks, CDC Director Rochelle Walensky said. Some 1,000 US counties with low vaccination rates, notably in the Southeast and Midwest, are particularly vulnerable.
Year-to-date, cyclicals have been some of the better performers. Energy shares are up 44.5% with the rebound in oil prices, and financials have gained 25%. In contrast, S&P 500 growth stocks are up 14.3%, lagging slightly the broader index′s 15.5% gain. Tech stocks are up 15% year-to-date.
Amid these concerns about the future trajectory of the pandemic, here are three stocks which will be on our radar next week:
1. Tesla
There might be some activity in Tesla (NASDAQ:TSLA) shares this coming week, after the electric carmaker reported on Friday that it delivered a record 201,250 cars worldwide in the second quarter. The quarterly sales data, which was released ahead of the company's second-quarter numbers scheduled for Monday, July 26, provide an important insight into the EV manufacturer's financial position amid the supply-chain issues hitting the entire auto industry.
The majority of sales during the period, which was marred by chip shortages, were of the company’s popular Model 3 sedan and the Model Y crossover. “Our teams have done an outstanding job navigating through global supply chain and logistics challenges,” Tesla said in a statement.
Shares of the Palo Alto, California-based company's stock closed on Friday at $678.90, down about 4% for the year. After remaining under pressure through June, the stock has started to show some strength during the past one month, gaining more than 12%.
2. Broadcom
Late last week, the Federal Trade Commission accused computer chip supplier Broadcom (NASDAQ:AVGO) of illegally monopolizing the market for semiconductor components.
The commission voted unanimously to file charges against the San Jose, California-based company, with newly appointed chair Lina Khan not participating in the vote. At the same time, the commission voted to accept a proposed consent order, addressing the issues in the complaint, signed by Broadcom for public comment.
Broadcom is one of the world’s largest chip manufacturers; it also makes smartphone parts, key components of networking equipment and semiconductors that run home Wi-Fi gear and set-top boxes.
The proposed agreement would prohibit Broadcom from entering some exclusivity or loyalty contracts with certain customers and require the company not to condition access to chips on exclusivity or loyalty deals. It would also prohibit Broadcom from retaliating against customers that deal with its competitors, according to CNBC.com.
“We are pleased to move toward resolving this Broadband matter with the FTC on terms that are substantially similar to our previous settlement with the EC involving the same products,” Broadcom said in a statement.
“We are equally pleased that the FTC investigation into our other businesses has been closed without action.”
Broadcom shares, which have gained about 7% this year, were little changed on Friday, closing at $468.17.
3. American Airlines
Investors will be closely watching air travel trends during the July 4 holiday weekend that could highlight the pent-up demand for travel for the busy summer period after more than a year of restrictions to stop the spread of the deadly COVID-19 pandemic.
The sudden jump in demand, fueled by consumers tired of staying close to home, has put a strained on the ability of airlines to rapidly rebuild operations after cutbacks, driven by the onset of the pandemic last year. Pilots who took leave, and those who were switched to new types of planes, have had to be retrained as flight demand has recovered to near-2019 levels, Bloomberg reported last month.
American Airlines (NASDAQ:AAL) has added flights back more quickly than its primary competitors. It's now operating about 10% below its 2019 seat capacity, according to records from flight-data firm OAG.
These capacity constraints, and the threat of new coronavirus variants, are pressuring AAL stock. Shares have fallen about 16% during the past one month.
Closing at $21.48 on Friday, the stock is still up 36% this year.