The S&P and NASDAQ took small steps back from record highs on Tuesday in preparation for a deluge of Big Tech data that began after the bell. Investors are feeling pretty confident about the earnings results, but you can never tell how the market will react.
In fact… let’s just get right to it. Alphabet (NASDAQ:GOOGL) (GOOG) and Microsoft (NASDAQ:MSFT) both beat on the top and bottom lines in their quarterly reports after the close. The online advertising powerhouse crushed expectations as ad revenue is finally picking up with the pandemic losing its grip, while the software giant had a more modest outperformance.
Unfortunately, “modest” doesn’t cut it these days. Shares of MSFT are down 2.5% afterhours as of this writing. However, GOOG beat earnings by more than 67%, which is more like it! The stock was allowed to buck the trend and rise approximately 4.5% afterhours. Quarterly reports need to be near perfect to get a positive response from the market, otherwise they’ll be punished even when they beat. GOOG succeeded in that regard, while MSFT didn’t.
But for today’s session, stocks were sluggish while awaiting the results. The S&P slipped 0.02% to 4186.72 on Tuesday, while the NASDAQ was off 0.34% (or about 49 points) to 14090.22. Both of these indices started the week with new closing highs yesterday; the first new closing high for the NASDAQ since February 12. The Dow was breakeven, though technically advanced by 0.01% (or about 3 points) to 33984.93.
Let’s take a quick break from earnings for a moment to mention the surge in Consumer Confidence this month. The index jumped to a pandemic high of 121.7, as consumers are being buoyed by stimulus checks and a rapid vaccine rollout that will hopefully have the economy near full strength soon.
Also, the Fed’s two-day meeting starts today, which means tomorrow we’ll be getting comments that will surprise absolutely no one. However, it will give Powell & Company a chance to reiterate for the umpteenth time that this super accommodative monetary policy will remain for the foreseeable future, even if inflation rises. The market loves to hear that!
There will be no letup in tomorrow’s earnings. After the bell, we’ll be getting reports from Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB). Other reports on Wednesday include Qualcomm (NASDAQ:QCOM), Boeing (NYSE:BA), Shopify (NYSE:SHOP), Ford (F) and eBay (NASDAQ:EBAY), among hundreds of others.
Today's Portfolio Highlights:
Stocks Under $10: Last week’s addition of Freightcar America (NASDAQ:RAIL) worked out really well for the portfolio with a gain of approximately 24% in just a few days! Brian decided to stick with the transportation space on Tuesday by adding Corporacion America Airports (CAAP), a Zacks Rank #2 (Buy) operator of private airports in Latin America, Europe and Eurasia. CAAP has beaten the Zacks Consensus Estimate in three of the past four quarters with an average surprise of 41%. The editor likes the “massive turnaround” to a profit of 85 cents next year from a loss of 69 cents this year. But the “key” to CAAP is topline growth estimates of 40.8% in 2021 and 41% in 2022. The portfolio also sold Rayonier Advanced Materials (NYSE:RYAM) for a 38.8% return in less than five months, while getting out of Gannett (GCI) and Arlo Technologies (NYSE:ARLO) for losses. Get specifics on all of today’s action in the complete commentary. In other news, this portfolio had a top performer today as Cassava Sciences (NASDAQ:SAVA) rose 6.1%.
Large-Cap Trader: The “old-timers” that John exited in this month’s adjustment are US Foods (USFD) for 37.6%, Cisco Systems (NASDAQ:CSCO) for 10.5% and Walmart (NYSE:WMT) de Mexico (WMMVY) for 10.6%. He still likes these names, but they’ve been in the portfolio for a while now (USFD and WMMVY were added over a year ago) and now it’s time for some new blood. The editor suggests spreading out the freed-up cash equally in these three names:
• Westlake Chemical (NYSE:WLK) – a Zacks Rank #2 (Buy) chemicals/plastics company
• Manpower (MAN) – a Zacks Rank #1 (Strong Buy) staffing name
• Alcoa (NYSE:AA) – a Zacks Rank #1 (Strong Buy) aluminum giant
As always, these are hot areas right now that should do well in the current environment. John is especially excited by their “outstanding” PEG ratios, which suggests that projected annual EPS growth is being overlooked. WLK, MAN and AA also have high Zacks Style Scores, are from strong industries, and reported double-digit surprises in their most recent quarterly reports. The allocations come to between 5.3% and 5.5% for each. Read the full write-up for a lot more on these moves.
Surprise Trader: Earnings season may be centered on Big Tech this week, but Dave went to the specialty chemicals space for today’s addition. He picked up AdvanSix (NYSE:ASIX), a Zacks Rank #1 (Strong Buy) producer and supplier of Nylon 6 materials that are used in all types of end products like automotive & electronic components, carpets, sports apparel, industrial packaging and much more. The company has beaten the Zacks Consensus Estimate in each of the past four quarters with an average surprise of 54.5%. And now it has a positive Earnings ESP of 7.69% for the quarter coming before the bell on Friday, April 30. The editor bought ASIX with a 12.4% allocation, while also selling First Hawaiian (NASDAQ:FHB) for a small loss. See the complete commentary for more on today’s moves.
Headline Trader: Earnings season has been great so far, but stocks are still moving lower after strong reports. In such an unpredictable environment, Dan wants to scale out of a big portfolio winner and repurchase it later at a lower price. He sold half of Square (SQ) on Tuesday for a 16.7% return in less than two months. The editor still loves this payment processing innovator, which “digitalizes Main Street in the rapidly digitalizing world we live in today”. However, it also has a high beta profile of 2.5, which makes it even more vulnerable to broader market price action. He’ll decide what to do with the other half tomorrow. Read more in the full write-up.
Marijuana Innovators: On Tuesday, the portfolio added Village Farms International (NASDAQ:VFF), a Canadian indoor (greenhouse) growing company with a thriving business in edible produce like tomatoes, but offers cannabis exposure as well. Make sure to read the complete commentary for the reasons why Dave bought this stock.
Healthcare Innovators: For the second session in a row, this portfolio had the top performer of the day. And once again... it wasn't even close! Novavax (NASDAQ:NVAX) jumped 16.3% on Tuesday, which more than doubled the second-place stock. Furthermore, Arbutus Biopharma (NASDAQ:ABUS) was in the top 5 as well with a rise of 5.5%. This portfolio also has two of the biggest winners over the past 30 days with Moderna (NASDAQ:MRNA, +37.6%) and Intellia Therapeutics (NASDAQ:NTLA, +34.5%).
Zacks Short Sell List: The portfolio swapped two names in this week's adjustment. The stocks that were short-covered on Tuesday included ServiceNow (NYSE:NOW, +2.5%) and Shopify (SHOP, +0.07%). The new additions that filled these spots were Aramark (ARMK) and TAL Education Group (NYSE:TAL). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.
Have a Good Evening,
Jim Giaquinto
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