U.S. stocks sold off on Friday to close sharply lower after the latest jobs report came in far stronger than expected, dampening bets for more rate cuts from the Federal Reserve this year.
All three of the major averages posted back-to-back weekly losses, with the S&P 500 falling 1.9% and the tech-heavy Nasdaq Composite declining 2.3%. The 30-stock Dow Jones Industrial Average gave up 1.9% on the week.
Source: Investing.com
The week ahead is expected to be another eventful one as investors continue to gauge the outlook for the economy and interest rates.
On the economic calendar, most important will be Wednesday’s U.S. consumer price inflation report for December, which could spark further turmoil if it comes in higher than expectations.
The CPI data will be accompanied by the release of the latest figures on producer prices, which will help fill out the inflation picture, as well as the December retail sales report.
Source: Investing.com
Elsewhere, the fourth quarter earnings season is set to get underway, with JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BlackRock (NYSE:BLK), UnitedHealth (NYSE:UNH), and Taiwan Semiconductor (NYSE:TSM) some of the big names due to report.
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 13 - Friday, January 17.
Stock To Buy: Goldman Sachs
I believe shares of Goldman Sachs will outperform this week, with its upcoming Q4 earnings report likely to surpass expectations.
Goldman’s financial results for the fourth quarter are due ahead of the opening bell on Wednesday at 7:30AM ET and are expected to show robust growth. The investment banking giant is benefiting from a rebound in IPO activity, mergers, and global deal-making, alongside steady growth in its wealth management division.
The expected move in the options market is about 5% up or down. The stock rose 1.3% after the last earnings report came out in mid-October to notch the third straight positive earnings-day reaction.
Source: InvestingPro
Wall Street sees Goldman Sachs earning $8.28 per share in the final three months of 2024, surging 51.1% from EPS of $5.48 in the year-ago period.
Meanwhile, revenue is anticipated to rise 10% year-over-year to $12.4 billion, reflecting solid growth in both its key investment banking unit and wealth management segment.
It should be noted that Goldman is seen as the most reliant on investment banking and trading revenue among its big bank peers on Wall Street.
CEO David Solomon is expected to strike an optimistic tone for 2025, as the financial services firm benefits from a resurgence in deal-making and IPO activity.
Source: Investing.com
GS stock ended Friday’s session at $560, the lowest closing price since December 19. At current levels, the New York-based investment banking behemoth has a market cap of $184.4 billion. Shares are down 2.2% so far in 2025 after scoring an annual gain of 48.4% in 2024.
It its worth mentioning that GS stock appears to be extremely undervalued heading into its earnings print according to the AI-powered Fair Value models on InvestingPro, which point to potential upside of +15.8% from the current market value to about $649/share.
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Stock To Sell: Citigroup
Staying in the financial sector, Citigroup faces a challenging outlook. Despite CEO Jane Fraser's restructuring efforts, Citi remains hindered by near-term headwinds, making it less compelling in the current environment.
The megabank’s Q4 update is due ahead of the opening bell on Wednesday at 8:00AM EST and results are once again likely to take a hit from a slowdown in its consumer banking division.
Market participants expect a possible implied move of around 4.4% in either direction for C stock after the report drops. Shares suffered an earnings-day decline of almost 3% after the financial services company’s Q3 update came out in October.
While the majority of analysts surveyed by InvestingPro raised their EPS expectations, estimates are still down from where they were 90 days ago.
Source: InvestingPro
Citi is seen earning $1.24 per share on revenue of $19.51 billion but lingering macroeconomic challenges and deposit stability concerns weigh heavily on its prospects.
Despite efforts by CEO Jane Fraser to streamline operations and implement strategic changes, Citigroup has been unable to deliver sustained growth. The economic environment and competitive pressures continue to hamper its performance, making it a less attractive option for investors.
C stock closed at $71.40 on Friday, pulling back from a recent 52-week high of $74.29. Shares are up 1.4% to start 2025 after scoring an annual gain of 36.8% last year.
At its current valuation of $135 billion, New York-based Citigroup is the fourth-largest banking institution in the U.S., behind JPMorgan Chase, Bank of America, and Wells Fargo.
Source: Investing.com
Be aware that Citi currently has a dismal InvestingPro Financial Health score of 1.9 out of 5.0 due to lingering concerns about profitability, growth, and free cash flow.
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Disclosure: At the time of writing, I am short on the S&P 500 and Nasdaq 100 via the ProShares Short S&P 500 ETF (SH) and ProShares Short QQQ ETF (PSQ).
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.
