Back at Record Highs Ahead of Big Tech Earnings Week

The market left Monday’s sharp selloff in the dust this week, rising even more sharply in the following four sessions and finishing Friday with all of the major indices at record highs. Meanwhile, investors are preparing for a big round of earnings that includes the rest of the FAANGs and other major tech names.

What a horrible first impression for this week. In a flurry of concerns about increasing inflation and rising covid counts, the Dow had its worst single-day performance of the year so far by plunging approximately 725 points on Monday. The other indices dropped by more than 1% as well. And we had just snapped three consecutive weeks of gains.

But here we are on Friday at all-time highs after solid advances for the five days. Several of the editors talked about Monday’s plunge being a severe overreaction… and they were certainly proven right!

"This week shows exactly how news accelerates a move to the technical level that needed to be tested," said Jeremy Mullin in Counterstrike. "Once that 50-day printed, the buyers stepped in and didn’t stop. The move higher was helped by short sellers, that piled in on the negative headlines. It was a trap once again and the bears paid dearly."

The NASDAQ was the big outperformer as tech is preparing for a deluge of earnings reports from the big, market-leading names. With the season being very positive so far, investors are optimistic that some good numbers are on the way. As a result, the index climbed 1.04% (or about 152 points) today to 14,836.99. The weekly advance was an impressive 2.8%.

The S&P rose 1.01% on Friday to 4411.79, while the Dow advanced 0.68% (or around 238 points) to 35,061.55. These indices were up 2% and 1%, respectively, this week.

As stated earlier, that’s new closing highs for all, which is the first time for that since Monday, July 12. And stocks had some challenges to overcome this week as well, including a disappointing jobless claims result yesterday and a mixed report from Netflix (NASDAQ:NFLX).

Overall though, the season has been solid thus far and provided enough upward momentum to overcome all the concerns. According to our Director of Research Sheraz Mian, twenty-four percent of the S&P’s total membership have reported so far with 89.2% beating earnings and 85% topping revenue expectations.

But now things are going to get really interesting. The big tech players report next week, including Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL) (GOOG) on Tuesday, Facebook (NASDAQ:FB) on Wednesday and Amazon (NASDAQ:AMZN) on Thursday. We’ll also be getting Tesla (NASDAQ:TSLA) on Monday, Microsoft (NASDAQ:MSFT) on Tuesday and hundreds of other reports.

Sheraz breaks it all down in his recent Earnings Preview article that’s aptly titled: “Big Tech Earnings Preview: Apple, Amazon and Other Market Movers”.

Today's Portfolio Highlights:

Surprise Trader: The car market is red hot right now, and so is Sonic Automotive (NYSE:SAH). This automotive retailer has beaten the Zacks Consensus Estimate for an impressive 15 straight quarters. And now this Zacks Rank #2 (Buy) has a positive Earnings ESP of 18.53% for the quarter coming before the bell on Thursday, July 29. SAH beat expectations by 30% last time and Dave thinks its set for another outperformance next week. The editor added SAH on Friday with a 12.5% allocation, while also selling Halliburton (NYSE:HAL) for a slight loss. Read the full write-up for more.

Counterstrike: When The Lovesac Company (NASDAQ:LOVE) talks about “alternative” furniture, they don’t just mean the style or pattern. They’re talking about sectional furniture that can be configured however the customer wants. Shares surged through May as its adaptable offerings really caught on. However, the stock has fallen 35% from highs and is close to some big support levels, which means Jeremy is now interested. He added a small 4% position in LOVE on Friday and will look to buy more on further declines. “We will navigate this position until the next big catalyst on September 8, which is earnings,” he said. The editor also likes the price action in Duck Creek Technologies (DCT), so he added 4% more and brought it to his max tier position. The service first added this name last week and it is now up approximately 5%. See the full write-up for more.

Blockchain Innovators: Today’s addition of GreenBox (GBOX) is just about the purest blockchain play that Dave has ever found for this portfolio. The company is an “emerging financial tech company that leverages proprietary blockchain security to build customized payment solutions”. In addition, the editor added GBOX today for two reasons: 1) the implementation of a special dividend series and 2) the stock is on sale after bottoming near $9. He considers this a speculative name, but likes the spin off of its stablecoin platform, the acquisition of Transact Europe and its technical picture. Dave also sold Conduent (NASDAQ:CNDT) before it slides any further. The complete commentary has a lot more on today’s action.

Headline Trader: Shares of “revolutionary fintech powerhouse” Square (SQ) have been soaring in recent days and is reaching overbought territory. Dan sold half of this position in late April for a double-digit return, and today he saw the perfect opportunity to sell the remainder of this volatile name. It brings a return of more than 21% in less than five months. Read the full write-up for more.

Technology Innovators: This portfolio easily had the best performer of the day as Clearfield (NASDAQ:CLFD) soared more than 19%. The wireless equipment name reported solid quarterly results with earnings per share beating the Zacks Consensus Estimate by over 51%. Revenues of $38.74 million also topped our expectations by 21%. The stock is now up nearly 44% in the portfolio since being added in late March. Brian doesn’t expect CLFD to see any negative impacts from inflation.

Have a Great Weekend!
Jim Giaquinto