What to expect in the week ahead? China trade war and earnings in focus

What to expect in the week ahead? China trade war and earnings in focus
Written by:
Jayson Derrick
May 31, 2020
  • Key events for the upcoming week include a response from China after Trump's Friday press conference.
  • Earnings to watch closely include Zoom, Broadcom, Campbell.
  • Friday could see the "most hideous" employment readout in history.

U.S. President Donald Trump was expected to signal a new trade war with China during his Friday press conference. But his comments fell shy of any worst-case scenario and the S&P 500 index finished the day higher by nearly 0.5%.

So what can investors expect for the week ahead? CNBC’s Jim Cramer explains his game plan on Friday’s “Mad Money.”

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Monday: China responds

Trump’s comments on China were “measured” and mostly focused on his desire to revoke Hong Kong’s special customs status. But for each time Trump “lands a blow,” China needs to react with a “counter-blow,” according to Cramer.  

However, now is not the time to restart escalating tensions with China — that time will come later “when we are stronger,” Cramer said.

Tuesday: Zoom reports

Investors should focus on “recession-resistant stocks” like health care, consumer packaged companies, and tech companies like Zoom Video Communications Inc (NASDAQ: ZM) that have now “become a household name.”

In fact, Zoom is scheduled to report fiscal first quarter results on Tuesday. Cramer says the company seems to have “grown like a wildfire every day” which does imply expectations for the print are “high.”

But Zoom should be viewed as a “market cap” story instead of an earnings story. The company should be worth a lot more than its current $50 billion valuation, Cramer said.

Wednesday: Is food hoarding over?

Campbell Soup Company (NYSE: CPB) is on deck to report its results on Wednesday. The food company’s report should signal if the food hoarding stage of the COVID-19 pandemic is over. 

But even if the food buying phase slowed down, Campbell is also a recessionary play given its diversified product line up.

Thursday: Broadcom, Gap in focus 

Broadcom Inc (NASDAQ: AVGO) has a lot of exposure to China and already rebounded sharply since bottoming near $150 in March. Since then it has already had such a strong run so maybe investors should wait until after it reports earnings on Thursday before making a decision, according to Cramer.

Retailer Gap Inc (NYSE: GPS) will also report earnings on Thursday and the stock might seem like a “tempting value play” below $10 per share, Cramer said. In this difficult retail environment, the play seems simple enough: “hard pass.”

Friday: Labor report

Friday could see the release of one of the “most hideous” economic readouts in history, Cramer said. The American people may not even be able to stomach the non-farm labor report for May. 

The employment figures released by the government will at the very least “throw cold water” over any hopes of a “V-shape” economic recovery — “if not drown it entirely.”