The market remained mixed on Thursday as technology got shellacked but the Dow managed to keep grinding higher. Investors had to deal with more earnings reports, another testimony from the Fed Chair and the latest read on jobless claims.
The Dow continued to push through the sluggishness and rose 0.15% (or nearly 54 points) to 34,987.02, marking its third positive performance in the past four sessions. It’s up for the week heading into Friday’s session and is less than 10 points away from returning to all-time highs.
The S&P was down 0.33% to 4360.03, while the NASDAQ dropped 0.70% (or more than 100 points) to 14,543.13. The FAANGs were all lower, especially Amazon (NASDAQ:AMZN, -1.4%). Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) were each off by 0.9%.
“The market is finally cooling off with overheated mega-cap tech stocks pulling the broader market lower,” said Dan Laboe in Headline Trader.
“This is a necessary and healthy retraction for a market that had been quite overbought. It is good to see some slack being loosened before these tech giants' Q2 results hit the wire at the end of this month, as this lowers the likelihood of a significant 'sell the news' after earnings price action we've seen with banks thus far.”
Speaking of the banks, they continued reporting on Thursday with the likes of Morgan Stanley (NYSE:MS) and US Bancorp (NYSE:USB), which reported earnings surprises of nearly 16% and more than 12%, respectively. They also beat Zacks expectations on the topline, though the latter company was down on a year-over-year basis. MS could only muster a 0.18% advance but USB was up 3.2%.
Another big report was Taiwan Semiconductor (TSM), which beat on both the top and bottom lines but had a softer-than-expected guidance. Shares were down 5.5% on a difficult day for tech.
The market is still reeling from two consecutive days with rising inflation indicators (CPI and PPI). Fortunately, we also got a second day of Fed Chair Jerome Powell mentioning the transitory nature of rising prices and further reiterating that the central bank will continue with its super accommodative policies until the economy reaches its benchmarks. He testified in front of the Senate Bank Committee, which completes his two-day Monetary Policy Report to Congress.
In other news, jobless claims of 360,000 improved upon last week’s upwardly-revised 386K. The result was slightly more than expected, but remained below 400K for a third straight week and made a new pandemic low.
Today's Portfolio Highlights:
Income Investor: Consumer electronics were in high demand during the pandemic as people suddenly needed to work and play from home, which explains why Best Buy (BBY) had such a strong Fiscal 2021. Such success continued in its fiscal first quarter, where sales spiked 37%. Comparisons will be tough as the pandemic comes to an end, but analysts still expect revenue and earnings growth of 4.9% and 7.8%, respectively, this year. Maddy noticed that BBY remains cheap at only 12.9x forward earnings. She also thinks this stock may be a Dividend Aristocrat in the making, as it has increased the annual payout every year since 2004 and currently yields 2.55%. BBY worked hard to adapt to the changing retail environment and has succeeded impressively, so Maddy decided to add it to the portfolio on Thursday. Read the full write-up for a lot more on this new addition.
Surprise Trader: The portfolio finally dipped into the banking space on Thursday as Dave added Hancock Whitney (NASDAQ:HWC). This Zacks Rank #2 (Buy) bank and financial holding company has topped the Zacks Consensus Estimate for four straight quarters now, beating by 24.7% in the most recent report. It has a positive Earnings ESP of 2.18% for the quarter coming after the bell on Tuesday, July 20. The editor added HWC on Thursday with a 12.5% allocation, while also getting out of BlackRock (NYSE:BLK) with a slight loss. Read the full write-up for more on today’s moves.
TAZR Trader: The portfolio cashed in three double-digit profits on Thursday as Kevin trimmed a few positions to raise money for a market roll-over. The editor trimmed more of The Trade Desk (NASDAQ:TTD) for a 44.9% return in just over two months as the profits look vulnerable. This is the third time the service is getting a double-digit return with this position. Meanwhile, half of BigCommerce (BIGC) was sold for 38.8% in two months and Shopify (NYSE:SHOP) was trimmed for 19.3% in a little over three months.
Options Trader: "It was day 2 of Fed Chair Jerome Powell's testimony before Congress, this time before the Senate Banking Committee, which saw him reiterate his belief that the current pace of inflation is temporary, and brought on by supply chain issues related to the pandemic.
"But he continues to believe that it will moderate. However, he did say the Fed will keep monitoring the situation just in case the current elevated pace drags on for longer than expected.
"Those sentiments were echoed by Treasury Secretary Janet Yellen, who said that she believes there could be 'several more months of rapid inflation', but that it will ultimately fall back to normal levels over time, using the words 'medium term' to describe it. Although, she too said that we need to keep a careful eye on it." -- Kevin Matras
All the Best,
Jim Giaquinto
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