Stocks on Wall Street ended little changed on Friday as markets assessed softer-than-expected inflation data that kept the Federal Reserve on track to deliver interest rate cuts this year.
Source: Investing.com
The major averages all posted declines for the week as AI disruption fears rippled beyond software stocks to sectors such as brokerages, commercial real estate firms, and logistics names.
The benchmark S&P 500 fell 1.4% to notch its second consecutive losing week, the 30-stock Dow Jones Industrial Average shed 1.2%, while the Nasdaq Composite tumbled 2.1%. The tech-heavy index has now fallen for five consecutive weeks, its longest losing streak since May 2022.
The holiday-shortened week ahead is expected to be an eventful one as investors continue to gauge the outlook for the economy, interest rates, and inflation. U.S. markets will be closed Monday for the Presidents Day holiday.
In a data-light week, most of the focus will fall on the minutes of the Federal Reserve’s January FOMC meeting. This could give some insight into the future path of interest rates. Friday will also be key, as it will see the release of the latest core PCE price index reading.
Source: Investing.com
As of Sunday morning, traders are pricing in two 25 basis-point rate cuts by the end of 2026, with a roughly 50% chance of an additional cut, according to the Investing.com Fed Monitor Tool.
Elsewhere, in corporate earnings, Walmart’s results will be the key update of the week as the reporting season draws to a close. Aside from WMT, quarterly earnings from Deere, Palo Alto Networks, and Toll Brothers are also due in the coming week.
Investors are also waiting for the U.S. Supreme Court on Friday to issue a ruling on the legality of President Donald Trump’s global tariffs.
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, February 16 – Friday, Feb. 20.
Stock To Buy: Analog Devices
Analog Devices (NASDAQ:ADI) sits at the epicenter of the industrial chip upturn. Its fiscal Q1 earnings report is due on Wednesday at 7:00AM ET and is expected to show 41% EPS growth and 28% sales growth, powered by surging demand in robotics, automation, and AI infrastructure.
Source: InvestingPro
Analyst sentiment has been notably positive heading into the print. According to InvestingPro data, 23 of the last 25 EPS revisions have been to the upside, highlighting growing confidence in the company’s continued expansion. The expected post-earnings move for ADI stock in the options market is +/-4.2% up or down.
Analog Devices benefits from secular trends in electrification, automation, and data-center growth. Recent quarters have shown robust recovery from inventory corrections, with strong free cash flow supporting dividends and buybacks.
ADI has been in a strong uptrend, recently hitting highs near $344 before a minor pullback. The stock trades well above key moving averages, with bullish relative strength versus the broader market. Support sits around $325-$330 (recent consolidation zone), while resistance is near the all-time highs (~$344).
Source: Investing.com
From a technical standpoint, all timeframes show strong buy signals, and the setup favors a post-earnings breakout for ADI if results align with or exceed expectations.
Trade Setup:
* Entry: Around current levels (~$337)
* Exit Target: $350-$360 (gain ~4%-7%)
* Stop-Loss: $325 (risk ~3.5%)
Stock To Sell: Walmart
Walmart (NASDAQ:WMT) just notched a historic $1 trillion market cap and is about to report earnings on Thursday morning at 7:00AM ET. By most fundamental measures, the business is in excellent shape: grocery market share is growing, its high-margin advertising arm is booming, and AI investments are boosting efficiency.
The problem? The stock is priced for perfection, with forward P/E at a sky-high 50.6x. This elevated positioning leaves little room for error. Any miss on forward guidance, even a modest one, could trigger a meaningful selloff as investors recalibrate their expectations. The expected earnings-related move in the options market for Walmart stock is a little over 8 points up or down.
Source: InvestingPro
Consensus expects EPS of $0.73 (up ~10% YoY) on revenue around $190 billion. The report is the first under new CEO John Furner, adding scrutiny. Analysts have grown increasingly cautious on WMT ahead of the print, with over half of the latest revisions being made to the downside.
Oppenheimer expects a strong print but warns guidance could disappoint, just as it did last year (stock fell ~8% on Q4 results). Jefferies also points out that Walmart thrives in an environment of price normalization and consumer belt-tightening, which is great for the business, but all that’s already in the price.
Source: Investing.com
WMT has rallied sharply to fresh all-time highs (~$134-$135 range), but momentum shows signs of exhaustion near the top. The stock is overextended on shorter-term charts, with RSI in elevated territory. Heavy volume on up days has tapered, and any negative reaction could lead to a sharp pullback toward support at $125.
Trade Setup:
* Entry: Around current levels (~$133-$134)
* Exit Target: $125-$128 (gain ~7%)
* Stop-Loss: $136 (risk ~2.5%)
Whether you’re a novice investor or a seasoned trader, leveraging InvestingPro can unlock a world of investment opportunities while minimizing risks amid the challenging market backdrop.
Disclosure: This is not financial advice. Always conduct your own research.
At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF. 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.
Read more on Investing.com India
