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The market won’t have a huge deficit to overcome this week, as the major indices pushed their winning streaks to five days on Monday and set another round of closing highs. Meanwhile, investors are getting ready for what's likely to be the most consequential week of earnings as the FAANGs and other tech giants are scheduled to report.
Remember last Monday? The Dow had its worst session of the year by plunging 725 points, while the other major indices dipped more than 1%. Investors were fretting about rising covid cases due to the delta variant. But then stocks pushed their fears aside and rallied for the next four days to finish with impressive weekly performances.
This Monday was a lot calmer, but stocks still made some history. The S&P advanced 0.24% to 4422.30, while the Dow rose by the same percentage (or nearly 83 points) to 35,144.31. The NASDAQ, which substantially outperformed last week, was the laggard with an advance of only 0.03% (or less than 4 points) to 14,840.71.
The indices reached new highs last Friday, which means these modest advances were enough to keep the record-setting pace alive. Stocks are coming off a week that saw the NASDAQ soar 2.8%, while the S&P and Dow increased 2% and 1%, respectively.
Despite its winning run over the past several days, the market has experienced a few disappointments lately. For example, the jobless claims number flew back above 400K last Thursday, while several inflation indicators are on the rise. And just today we saw another decline in new home sales. However, this earnings season started strong and investors seem very excited about the big tech releases.
It got started today with Tesla (NASDAQ:TSLA), which beat on both the top and bottom lines in its second quarter. In fact, earnings eclipsed the Zacks Consensus Estimate by more than 61%. Best of all though, shares of the electric vehicle trailblazer are up 2.5% afterhours as of this writing.
But that’s just the tip of the iceberg for this week. Tomorrow, we’ll be getting reports from Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) (GOOG) and Microsoft (NASDAQ:MSFT), along with dozens of others. And if that wasn’t enough, Tuesday also begins the Fed’s two-day policy meeting.
So be ready, because things are about to get a whole lot busier.
Today's Portfolio Highlights:
Surprise Trader: Last earnings season, Dave picked up department store chain Dillard’s (DDS), which became the best performer in the portfolio. But this is a new season, and the editor needs to make room for fresh entries. So he cashed out the rest of DDS on Monday and secured a more than 77% return in less than three months. The first half was sold on May 18 for a double-digit profit. The new buy is Terex (NYSE:TEX), which makes aerial work platforms, materials processing machinery and cranes. This Zacks Rank #1 (Strong Buy) has topped earnings expectations for three straight quarters (including by 154% last time), and now has a positive Earnings ESP of 15.41% for the quarter coming after the bell on Thursday, July 29. The stock has the declining price/rising estimates divergence that Dave likes to see. He added TEX today with a 12.5% allocation. Read the full write-up for more.
Black Box Trader: Only two positions were replaced in this week's adjustment. The portfolio sold Textron (NYSE:TXT, +7.05%) and The Chemours Company (NYSE:CC), and then filled these open spots by buying L Brands (NYSE:LB) and Nike (NYSE:NKE). Read the Black Box Trader’s Guide to learn more about this computer-driven service.
Headline Trader: "We are reaching the precipice of what is well on its way to being the highest growth earnings season in over a decade, with mega-cap tech reporting their quarterly results over the next few days.
"We have a piping hot lineup of quarterly results from market movers tomorrow after the bell, most notably the mega-cap tech giants Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL). These three tech giants make up over 16% of the S&P 500 and nearly 30% of the Nasdaq 100. These incomprehensively massive technology conglomerates have accounted for a significant portion of the broader public equity recovery since the lows, bringing in a combined $3.4 trillion in market value since March 23rd, 2020.
"Anything short of a top & bottom line beat will almost certainly result in profit-pulling. An enormous amount of optimism is priced into every one of these names, and forward-looking guidance will be the primary catalyzer of these stocks' post-earnings price action." -- Dan Laboe
Until Tomorrow,
Jim Giaquinto
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