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Stocks Jump 1% This Week as Earnings and Data Outperform

It was a week full of strong reports to kick off earnings season, as well as encouraging economic data to kick off an economic boom. As a result, each of the major indices gained 1% or more over the five days with two of them sustaining a record-setting pace and the third on the doorstep of its own milestone.

The Dow kept pushing past 34K on Friday with a gain of 0.48% (or about 164 points) to 34,200.67. The S&P rose 0.36% to 4185.47. Both of these indices hit new record closes (just as they did yesterday) and rose by 1.2% and 1.4%, respectively, for the week.

After moving 1% or more in each of the previous three sessions, the NASDAQ only advanced 0.10% (or around 13 points) to 14,052.34. But its now only 0.3% from its own closing high set all the way back in mid-February. The index rose 1% this week.

Strong bank earnings continued today with Morgan Stanley (MS) and PNC Financial (PNC) beating by 29% and 49%, respectively.

The past three days have laid the foundation for a strong season with solid performances from JPMorgan (JPM), Wells Fargo (WFC), Goldman Sachs (GS), Bank of America (BAC) and Citigroup (C) as well… even if the market didn’t always reward the positive results. These banks have been releasing billions of dollars in loan loss reserves that were put aside during the pandemic.

“In effect, these banks are saying, through these reserve releases, that they expect economic conditions in the coming quarters to be stronger relative to what they had originally modeled. This creates a favorable read-through for all sectors, particularly the economically-sensitive ones,” said Zacks’ Director of Research Sheraz Mian in his new article titled: Big Banks Foreshadow the Improving 2021 Earnings Picture.

Meanwhile, the University of Michigan’s consumer sentiment index rose to 86.5 in the first half of April, which is a one-year high. This data comes a day after reports of retail sales soaring 9.8% in March and jobless claims of only 576K for last week. Both of those results easily surpassed expectations and provide further optimism that we’re moving past the pandemic.

Earnings season picks up steam next week with more than 250 companies reporting, including the first FAANG as Netflix (NFLX) takes centerstage on Tuesday.


Today's Portfolio Highlights:

Surprise Trader: With earnings season underway and this portfolio getting a whole lot busier, Dave wants to shed the older names to make room for new additions. Therefore, he took a “victory lap” on Friday by selling homebuilder Lennar (LEN) for a more than 20% return in a little over a month. The new buy is Tractor Supply (TSCO), the largest farm and ranch chain in the country. This Zacks Rank #2 (Buy) has beaten the Zacks Consensus Estimate for four straight quarters now, and the editor expects more of the same when it goes to the plate again before the bell on Thursday, April 22. It has a positive Earnings ESP of 4.5%. Dave added TSCO today with a 12.5% allocation. Make sure to see the complete commentary for more on today’s action.

Options Trader: This portfolio has repositioned into new options a couple times this week, so let’s do it one more time before the weekend! As you know, Kevin likes to pull profits on options that have doubled the premium and then add a new one with more time at the original dollar amount. He calls it a “free trade”. And that’s what he did on Friday with Nasdaq (NDAQ). The editor sold to close the June 145.00 Call for a 117% return and then bought to open a September 165.00 Call. Therefore, the principal is protected and the position can continue making money. See the full write-up for more.

Blockchain Innovators: You were promised an addition for Friday... and here it is! The portfolio added Sohu.com (SOHU), an online advertising, media and gaming services company. A unit of SOHU has set up a blockchain research institute called Fox Fintech, which uses the technology to reduce credit costs in the financial sector and promote the growth of peer-to-peer lending. Rising earnings estimates have made the company a Zacks Rank #2 (Buy). Meanwhile, Dave also sold the underperforming Digi International (DGII) position after it slipped to a Zacks Rank #4 (Sell). Read the full write-up for more on today’s moves. In other news, this portfolio had a top performer on Friday as iClick Interactive Asia Group (ICLK) rose 7.5%.

Healthcare Innovators: Last Friday, Kevin re-bought vaccine maker Novavax (NVAX) after pulling a more than 40% profit out of this name in March. He said that a lot of the company’s positives weren't being reflected in its share price, which was opening up an opportunity. Well, on this Friday NVAX was the top performer among all ZU names with a gain of 12.5%. In fact, all of the portfolio’s vaccine names did well this week, giving Moderna (MRNA) a spot in the top 5 as well with an advance of 6.8%. A vaccine shortage in a few countries around the globe will keep demand for these treatments very high as we put the pandemic in the rear-view mirror. One more thing, NVAX is also the top performer over the past 30 days in Kevin’s other portfolio, TAZR Trader. It’s up 26.5% in that time.

Have a Great Weekend!
Jim Giaquinto

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