Low Volume Continued Ahead of Fed and FAANGs

We had another low volume session on Wednesday as investors continue to lay low and hope for the best as the world’s biggest technology companies take centerstage this earnings season. Fortunately, these heavy-hitters are releasing impressive results so far that not even this finicky market can ignore.

The S&P reached an intraday high earlier, but couldn’t hold onto it. The index still had the best performance with a decline of only 0.08% to 4183.18, while the NASDAQ slipped 0.28% (or about 40 points) to 14,051.03. That makes two straight days of losses for these indices after reaching new closing highs on Monday. The Dow was off 0.48% (or around 164 points) to 33,820.38.

The big reports after the bell last night came from Alphabet (NASDAQ:GOOGL) (GOOG) and Microsoft (NASDAQ:MSFT), which rose 3.2% and slipped 2.8%, respectively, on Wednesday. GOOG really destroyed expectations with a positive earnings surprise of more than 67% as ad revenue picked up, while MSFT beat expectations but with less vigor than the market likes right now.

The Fed meeting was about as boring as expected, which is exactly what investors wanted! Fed Chair Jerome Powell said that the economy is improving, but that it’s still far from recovered. Therefore, rates will stay near-zero for the foreseeable future, and this super accommodative monetary policy will not immediately come to an end when inflation reaches 2%.

Getting back to earnings season, we’ve been talking about how strong reports don’t always lead to strong stock performances in this demanding market. Well, that wasn’t the case for the big releases that came after the bell today. Shares of Apple (NASDAQ:AAPL) are up 1.9% afterhours, as of this writing, while shares of Facebook (NASDAQ:FB) are higher by 5.8%!

AAPL beat the Zacks Consensus Estimate by 40% while sales surged nearly 54%. The all-important iPhone sales were up more than 65%, while Mac and iPad sales each soared more than 70%. Much like Alphabet yesterday, FB saw a rise in ad revenue since the pandemic’s days are numbered. Earnings also topped by 40% while revenue growth was 48%.

We’ve had a fantastic FAANG Week so far, and there’s still one more to go as Amazon (NASDAQ:AMZN) gets ready to report after the close tomorrow. As always though, that’s just one of hundreds of names scheduled for Thursday, which also includes Mastercard (NYSE:MA), Comcast (NASDAQ:CMCSA), Merck (MRK), McDonald’s (MCD) and Caterpillar (NYSE:CAT).

Today's Portfolio Highlights:

Home Run Investor: The portfolio needed some oil patch exposure, so Brian added US Silica Holdings (NYSE:SLCA) on Wednesday. This fracking name has beaten the Zacks Consensus Estimate in the past four quarters with an average surprise of 65%. Improving earnings estimates have made the stock a Zacks Rank #2 (Buy). Topline growth is expected at 9.3% this year and 19.5% next year, while operating margins turned positive two quarters ago. SLCA reports again on April 30 and it appears that investors are getting long before the print. The editor added the stock on Wednesday, and also dropped the underperforming Primoris Services (NASDAQ:PRIM) position before its report next week. Read the full write-up for more on today’s action. By the way, this portfolio had a top performer today as Everi Holdings (NYSE:EVRI) rose 12.6%.

Surprise Trader: Will it be lucky #7 for MACOM Technology Solutions (MTSI)? This provider of power analog semiconductor solutions has beaten the Zacks Consensus Estimate for six straight quarters now. It reports again tomorrow before bell, so this is one of Dave’s very "quick turnaround” ideas. This Zacks Rank #2 (Buy) beat by 9.5% last time. The editor added MTSI on Wednesday with a 12% allocation, and also sold Badger Meter (NYSE:BMI) for a slight loss after getting tired of its mostly sideways action. Read the full write-up for more on today’s moves.

Headline Trader: "The S&P 500 hit another (very marginal) all-time today, with the major indexes trading around even on relatively low volume (a trend this week). The conclusion of the Federal Reserve's meeting and Jerome Powell's subsequent video conference this afternoon had little impact on the markets with no real surprises and investors laser-focused on earnings.

"We have had a tremendous beginning to the Q1 earnings season, seemingly justifying this crazy broader market rally we've been experiencing since the March lows. This narrative continues into this evening's results.

"I have been impressed with the results from Q1 overall, with some unbelievable reports justifying lofty valuations. I expected beats, but I didn't anticipate this magnitude of beats that enterprises have illustrated, which has kept the major averages buoyant through what I thought would be a much rocky week." -- Dan Laboe, who breaks down some of the most impressive reports of the week in his complete commentary.

All the Best,
Jim Giaquinto