There were no eleventh-hour monkey-wrenches thrown into the market mix on Friday, as a strong jobs report for October kept the major indices in record territory to finish a fifth straight week of gains.
The term “goldilocks” has already been used to describe this month’s Government Employment Situation report, which showed that 531,000 jobs were added last month. The result easily surpassed expectations at 450K, but isn’t considered “too hot” by investors. It was a nice turn of events from the September number, which fell well short of forecasts at the time.
The result fits in nicely with what the Fed said on Wednesday after its two-day policy meeting. The Committee thinks this economy has recovered enough to begin tapering the monthly bond purchases.
The jobs number and the Fed decision were the two big events of the week, and they were both welcomed by the market. As a result, stocks continued moving higher on Friday.
The Dow was the only major index with a negative close this week as it moved slightly lower yesterday. But it was back to an all-time high today by climbing 0.56% (or about 203 points) to 36,327.95. It was helped by a solid session from “re-opening” spaces like cruise lines, casinos and airlines. Encouraging results for Pfizer’s (PFE (NYSE:PFE)) Covid-19 pill was also a help and sent that stock higher by nearly 11%.
The other major indices didn’t see a negative close all week. The S&P was up 0.37% today to 4697.53, while the NASDAQ advanced 0.20% (or about 31 points) to 15971.59. That makes seven straight days of record highs for these indices.
The weekly totals (and winning streak) are just as impressive. The NASDAQ jumped 3% over these five days, while the S&P was up 2% and Dow increased 1.4%. These indices have now been on the plus side for five straight weeks.
And we’re still in the midst of a solid earnings season as well, though our Director of Research Sheraz Mian notes that earnings and revenue growth has mellowed in the third quarter from the first half. Make sure to read his brand new article titled: “Are Earnings Estimates Going Down?”
The scoreboard remains impressive. Nearly 90% of S&P 500 members have reported with earnings and revenues higher by 42.9% and 18.6%, respectively. The proportion of these companies beating both EPS and revenue estimates is 62.9%.
Today's Portfolio Highlights:
Insider Trader: Energy stocks had a huge run over the past year and reported strong numbers this earnings season... and now the insiders are finally getting involved. Tracey has been waiting for this and so she added two names from the space on Friday: ExxonMobil (NYSE:XOM) and Oasis Petroleum (NASDAQ:OAS). Both companies reported strong quarters and are up solidly so far in 2021. XOM saw a director buy 5000 shares on Wednesday, while an OAS director bought over 1100 shares across two recent purchases. The editor is most impressed that these directors are buying while their stocks are on the rise... and she expects more energy insiders to get involved in the weeks ahead. The portfolio is putting 10% into each name. Get a lot more info on these companies and their insider moves in the full write-up.
TAZR Trader: The big winner among all ZU names on Friday was software-as-a-service company BigCommerce (BIGC), which surged more than 28% after a strong third-quarter report that included a positive surprise of more than 57%. While analysts are beginning to give the stock some love, Kevin has near-term concerns about the fintech + e-comm space after negative reactions to the Square (SQ) report. Therefore, today’s rally provided a fantastic opportunity to sell some of BIGC and bank a nice 34.4% return from the oldest batch bought on May 12. The portfolio will hold onto the second wave since the editor is bullish on BIGC and would add more on any pullback moving forward.
Surprise Trader: Ever since going public fifteen quarters ago, CarGurus (NASDAQ:CARG) has been beating the Zacks Consensus Estimate. Or to put it another way, this stock has never missed quarterly earnings expectations! So Dave feels pretty good that this online marketplace for used and new cars will outperform again when it reports after the bell on Tuesday. But its not just a gut feeling. CARG, which boasts an average surprise of 52% over the past four quarters, enjoys an Earnings ESP of 2.06% for the upcoming report. The editor finished off this week by adding CARG with a 12.5% allocation, while also getting out of the underperforming Genco Shipping (NYSE:GNK) position because the shipping stock boom looks like it might be over. Read the full write-up for more on today’s moves.
Headline Trader: With the pandemic subsiding and jobs growth accelerating (especially in the leisure & hospitality sectors), Dan wants to get the portfolio some exposure to the valuation-compressed commercial airline space. The editor considers the best-positioned airline moving forward to be Alaskan Air (ALK), which was one of the few companies in its beleaguered space to return to profitability in the third quarter. This airline is a budget vacation play, which Dan thinks is the sweet spot right now since business travel probably won’t return to pre-pandemic levels for a while. But people are certainly in the market for a vacation these days! Plus, ALK still enjoys “ripening synergies” from its acquisition of Virgin America back in 2016. Learn a lot more about this new addition in the full write-up.
Healthcare Innovators: The market has the wind at its back right now, so Kevin decided to make a riskier-than-usual play by adding a small position in Adaptimmune Therapeutics (NASDAQ:ADAP). This Zacks Rank #2 (Buy) is an $800 million company that's focused on cancer immunotherapy products based on a T-cell receptor platform. The editor really appreciates some of ADAP’s good news of late, which includes a collaboration with Genentech and a positive early-stage study. However, Kevin warns that this is a HIGHLY SPECULATIVE biotech name with a data event next week, which is why he’s only “dipping a toe in” with a small addition between $5 and $5.50. He strongly suggests that you not be tempted to do any more at this time. Read the complete commentary for a lot more on ADAP.
Have a Great Weekend!
Jim Giaquinto
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