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Record-Setting Pace Continues as Earnings Season Begins

SPECIAL ALERT: Remember, the latest episode of the Zacks Ultimate Strategy Session will be available for viewing no later than this Wednesday, July 14. Kevin Matras, Jeremy Mullin, Brian Bolan and Sheraz Mian will cover the investment landscape from several angles in this informative event.

Don’t miss your chance to hear:

▪ Jeremy and Brian Agree to Disagree on whether crude oil is in a bullish run and will print $100 a barrel before it’s over
▪ Kevin answers your questions in Zacks Mailbag
▪ Sheraz and Brian choose one portfolio to give feedback for improvement
▪ And much more

So be sure to mark your calendar then log on to and bookmark this page.

Business is about to pick up big time in the market as earnings season is finally here. Stocks grinded slowly higher on the eve of a couple major bank reports, but the indices still made records since they came into the session at new highs.

This week also sees the CPI report tomorrow and testimony from Fed Chair Jerome Powell on Wednesday and Thursday. So this is going to be a pretty busy and possibly consequential week for investors.

We got started on the right foot, though, with gains on Monday. The Dow was up 0.36% (or about 126 points) to 34,996.18, while the S&P rose 0.35% to 4384.63. The NASDAQ contributed with an advance of 0.21% (or around 31 points) to 14,733.24.

That marks new record closes for each of the major indices. Of course, any increase would make history since stocks had a fantastic end to last week with a more than 1% rally. The uptrend reversed losses from the day before, which momentarily had investors worried that the economic recovery would stall. Those fears seem to be on the backburner for now.

Earnings season gets underway before the market opens tomorrow with reports from JPMorgan (JPM) and Goldman Sachs (GS). People must be feeling pretty good because JPM was up 1.4% today and GS climbed 2.4%. PepsiCo (PEP) also goes to the plate tomorrow and inched out a 0.02% advance on Monday.

There’s plenty of reason to be optimistic for this season. According to our Director of Research Sheraz Mian, total Q2 earnings for the S&P is expected to jump 62.2% from last year on revenue growth of 18.2%. (This would be a great time to check out his recent article titled Previewing Q2 FY21 Bank Earnings.) The big question is: Will the market actually reward strong reports this time?

And there’s even more going on before the bell tomorrow. The CPI report will be released. Last month, consumer prices rose 5% for May year over year, which was the highest in nearly three decades and above expectations. Nevertheless, stocks rose in that session (June 10).

“This has market moving implications as a hot number could force the Fed’s hand in tapering and rates,” said Jeremy Mullin in Counterstrike. “Hard to speculate here as prices have shot higher in some areas of the economy, but we have seen some relief over the last month. The move lower in rates lately gives me a feel that we won’t get a hot number.”

And if you want more potentially market moving news this week, let’s not forget Mr. Powell’s Monetary Policy Report to Congress later this week. There was some talk of tapering in the Fed minutes released last week, but for the most part the Committee plans to be patient and continue supporting this economy until the benchmarks say otherwise.

Get ready for a crazy week!  

Today's Portfolio Highlights:

Counterstrike: The new week kicked off with two trades on Monday, as the editor added Foot Locker (FL) and Gibraltar Industries (ROCK). FL is a Zacks Rank #1 (Strong Buy) athletic shoes and apparel retailer that jumped after a big quarter back in May, but has since been trading sideways. A move below $60 prompted Jeremy to get involved before its earnings report. ROCK is a Zacks Rank #2 (Buy) that provides products to the industrials and buildings markets. The stock has been loitering around after a double digit drop, but the $75 level has been holding. The editor thinks its poised for a bounce before the early August report. FL was added with an 8% allocation and ROCK has a 4% allocation. Read the full write-up for more, including the suggested limit order for ROCK.

Surprise Trader: The early days of earnings season are full of reports from banks, but Dave is going somewhere else for his first buy of the week. On Monday, the portfolio picked up Controladora Vuela (VLRS), a provider of aircraft transportation services. This is a reopening play, which will be the editor’s focus here in the early days of the season. VLRS beat the Zacks Consensus Estimate in the past two quarters and has a positive Earning ESP of 71.43% for the quarter coming after the bell on Thursday, July 15. The stock was added today with a 12.5% allocation. Read the full write-up for more on this move.

Value Investor: The portfolio added an E&P and a regional bank on Monday... with the possibility of a third pick later this week! Diamondback (FANG) is a larger-cap E&P and one of the largest drillers in the Permian. Tracey is well aware that this Zacks Rank #1 (Strong Buy) is up 85% year to date, but earnings are expected to rise 196% this year and another 26.5% next year. But most importantly, it’s still cheap (it has yet to return to 2018 highs) and has one of the best balance sheets in the space. Meanwhile, United Community Banks (UCBI) is a mid-cap regional bank in the Southeast, which is a part of the country enjoying population growth. Shares have cooled off more than 7% over the past three months, but are still up 11.2% year-to date. The stock is cheap and pays a dividend yielding 2.4%. Read the full write-up for a lot more on these new additions and the editor’s plans for the portfolio this summer.

By the way, InMode (INMD) was easily the best performer on Monday after “crushing” preliminary results again, which included raising its full-year revenue guidance. Shares of the company, which uses radio-frequency tech for beauty treatments, soared 12.5% today and is now the biggest winner in Value Investor with a 343.6% return since being added in April 2020. Canadian Solar (CSIQ) also made the Top 5 with a rise of 5.5%.  

Black Box Trader: The portfolio switched three names in this week's adjustment. The stocks that were sold included:

• Cleveland-Cliffs (CLF, +7.7%)
• Signet Jewelers (SIG, +2.4%)
• Sally Beauty Holdings (SBH)

The new buys that filled these just-opened spots are:

• Athene Holding (ATH)
• Covanta Holding (CVA)
• Jabil (JBL)

Read the Black Box Trader’s Guide to learn more about this computer-driven service.

Headline Trader: "We are on the precipice of Q2 earnings hysteria, and all the large-cap indexes grinded up to new record closes today. The markets are just floating higher as investors prepare their portfolios for this quarterly public equity catalyst.

"The incessant bullish narrative in stocks may be vulnerable to change in the coming weeks. Nevertheless, investors & traders are optimistic about the first reporting sector, as banks catch a solid bid to lead today's session.

"The commencing June quarter reporting season will put the 'goldilocks' markets theory (not too hot, not too cold) to the test and either validate or nullify the lofty valuations amid the swiftest economic rebound in US history."
-- Dan Laboe

Until Tomorrow,
Jim Giaquinto

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