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Heading Into Earnings Season with Dow and S&P at Record Highs

Published 04/09/2021, 09:15 PM
Updated 07/09/2023, 06:31 AM

A strong late-day rally on Friday made an already solid week even better, complete with new closing highs for a couple major indices and some positive momentum heading into the first-quarter earnings season.

The S&P closed above 4100 by climbing 0.77% to 4128.80, marking a third straight record close. What a month for this index so far! It finished above 4,000 for the first time ever on April 1 and reached new highs in each session except one.

The Dow jumped 0.89% (or nearly 300 points) to 33,800.60, which was its first closing high since Monday. And the NASDAQ joined the fun with a rise of 0.51% (or about 70 points) to 13,900.19.

For the full week, the NASDAQ jumped 3.1%, while the S&P was up 2.7% and the Dow gained nearly 2%.

Stocks accomplished all this despite low volume and some sluggish economic data. Today, the Producer Price Index (PPI) for March surged 4.2% year over year and 2.8% from February. It’s a concerning result for a market nervous about inflation. And yesterday, jobless claims for the previous week soared past expectations to 744K.

But the market is just feeling too good right about now. It helps that investors are still reeling (in a good way) from last Friday’s Government Employment Situation report, which stated that the economy added 916K jobs in March. The result was nearly 250K better than expectations and more than doubled the previous month’s result.

And let’s not forget that Fed Chair Jerome Powell takes every opportunity to reiterate that the economy is far from recovered and this super accommodative monetary policy will be in place for the foreseeable future. Meanwhile, the vaccine rollout continues and seemingly abandoned areas like travel and leisure are beginning to get back on track.

This optimism couldn’t come at a better time, as we’re about to kick off the first-quarter earnings season. And you know what that means… the big banks are coming to the plate! Some of next week’s major announcements include JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) on Wednesday; Citigroup (NYSE:C) and Bank of America (NYSE:BAC) on Thursday; and Ally Financial (NYSE:ALLY), PNC Financial (NYSE:PNC) and Morgan Stanley (NYSE:MS) on Friday.

The fourth quarter was better than expected, and our Director of Research Sheraz Mian thinks that the first quarter is going to be very solid as well. In fact, he sees earnings growth of 20.4% and revenue growth of 5.6%. Be ready for the season with Sheraz’s new article: Looking Ahead to Big Banks’ Q1 Earnings.

Today's Portfolio Highlights:

TAZR Trader: You probably remember that this portfolio pulled a more than 40% profit out of Novavax (NASDAQ:NVAX) just last month. Those kinds of gains are hard to forget! Well, Kevin thinks this vaccine maker can do it again. Simply put, there’s a lot that can go right with this name that isn’t being reflected in the share price, which means there’s a great opportunity here. Therefore, the editor added NVAX again on Friday with a 7% allocation. Make sure to read his full write-up for more on all the positive news for this name and comments from one of his favorite biotech watchers.

Stocks Under $10: When Brian added GT Biopharma (GTBP) this past Tuesday, he did so with haste since the immune-oncology company was going “bonkers” and getting close to this portfolio’s $10 cutoff. Well, it’s a good thing he moved so quickly, because today the stock was easily the top performer among all ZU names with a surge of nearly 18.8%. The stock was recently uplisted to the NASDAQ and has developed a technology that allows “Natural Killer” (NK) cells to extend their life cycle to around 90 days from just three hours. By the way, this portfolio also has a top performer over the past 30 days as Himax Technologies (NASDAQ:HIMX) has soared more than 29%.

Counterstrike: "Next week we should hit my 4160 targets and then I would expect a pullback. We closed only 30 handles away, so the next few up days should be about profit taking.

"Remember that it is earnings season soon so individual stocks have some risk coming up. It never hurts to take some profits in big winners and reevaluate. Look out for some management next week and perhaps we will start looking for the short side again."
-- Jeremy Mullin

Headline Trader: "Today's sky-high PPI figure seems like it should have catalyzed big moves in US Treasuries, but it didn't. Jerome's calm words of continued monetary stimulus with sizable expected short-term pricing pressures that will level out over time have the market's taking this inflation "red flag" with a grain of salt.

"Investors realize that worrying about inflation is not a good money-making play today. As I said yesterday, the markets are holding their hand until Q2 earnings kick off next week, with big banks being the big focus.

"We are in the beginning phases of a robust bull market, but many are still projecting a 10% market pullback this year. Profit-pulling from this upcoming earnings season combined with the 10-Year yield driving above 2% could catalyze a market correction.

"I'm confident that we will close this year out higher than we are today, but I'm sure there will be some exciting trading actions to take advantage of ahead."
-- Dan Laboe

Have a Great Weekend!
Jim Giaquinto

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