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Earnings Optimism Keeps S&P and NASDAQ Moving Higher

The market had enough momentum left over from last week’s excellent performance to secure a fourth straight session of gains for two of the major indices. And now investors will watch as earnings season broadens outside of the financial space, including the first report from a FAANG.

The NASDAQ was the best performer on Monday by climbing 0.84% (or nearly 125 points) to 15,021.81, while the S&P rose 0.34% to 4486.46. These indices have been in the green ever since last Wednesday when the CPI report was only slightly hotter than expected.

The Dow didn’t come along for the fun, but only declined by 0.10% (or around 36 points) to 35,258.61. Disney (DIS) took a toll on the index by slipping 3% after an analyst downgraded the entertainment giant on concerns of slowing growth for the streaming service.

Stocks overcame a sluggish morning brought on by some soft economic numbers out of China. GDP for the world’s second-largest economy grew 4.9% in the third quarter, missing expectations of more than 5%.

Here in the U.S. though, stocks are returning from one of their best weekly performances in months. The NASDAQ jumped 2.2% last week, while the S&P and Dow increased 1.8% and 1.6%, respectively.

Investors have enjoyed a plethora of decent-to-solid economic data, including some acceptable reads on inflation from the CPI and PPI. Meanwhile, jobless claims declined to a new pandemic-era low beneath 300K, while retail sales were easily positive (+0.7%) compared to the slightly-negative expectations.

Most importantly though, earnings season kicked off with a fantastic start from the big banks, including Goldman Sachs (GS), Bank of America (BAC), JPMorgan (JPM), Morgan Stanley (MS) and Citigroup (C), among others.

"Even though it only just officially began last week, (earnings season is) already delivering with better than expected earnings. And stocks are responding," said Kevin Matras in today's Options Trader. "Stocks typically go up during earnings season, and we’re seeing that again, so far, with this one."

These strong earnings reports, along with the aforementioned economic data, have reassured nervous investors that the economy is pushing through the soaring inflation and global supply chain issues.  

This week will provide plenty more opportunities for the market to show off. Tomorrow’s big reports include Johnson & Johnson (JNJ) and Procter & Gamble (PG) both before the bell. And then after the close we’ll be getting our first FAANG report when Netflix (NFLX) goes to the plate. The streaming service was up more than 1.5% today.

Today's Portfolio Highlights:

Surprise Trader: It’s always fun to start off a new week by cashing in a double digit winner... and that’s what Dave did today with chemicals company AdvanSix (ASIX). The portfolio added this name in late July and then sold half of it just two weeks later for a gain of more than 20% after a solid quarterly report. It’s good that the editor held onto to the rest, because he sold the second half on Monday for a more than 45% return. The portfolio also sold the rest of Dave & Busters (PLAY) for a 4.1% return in a little over five weeks.  

The new buy is Nucor (NUE) from the highly-ranked Steel – Producers industry (Top 10%). This Zacks Rank #1 (Strong Buy) topped the Zacks Consensus Estimate in 10 of the last 11 quarters and will report again on Thursday, October 21 before the bell. Dave added NUE today with a 12.5% allocation. Read the full write-up for a lot more on all of today’s action.

Counterstrike: For the fourth time in the past several years, Jeremy is buying leading RV manufacturer Thor Industries (THO). The editor has a “love/hate relationship” with this stock, but its volatility continually makes it an intriguing opportunity. Such is the case right now. Shares dropped nearly 20% last week despite a strong quarterly report in late September that also included a raised dividend. Jeremy thinks THO is due for a rebound, considering its almost $17 billion backlog and its ability to effectively manage supply chain issues. The stock was added on Monday with an 8% allocation with plans to add more if it gets back to that $120 level. See the complete write-up for more. By the way, this portfolio saw the second-best performer among all ZU names on Monday with ProShares UltraShort Bloomberg Natural Gas (KOLD) soaring over 14%.

Healthcare Innovators: You want to know how bullish Kevin is for the long-term prospects of biotech? He started this week off by buying THREE opportunities. The new additions are:

• ARK Genomics ETF (ARKG) – a less volatile way to prepare for the eventual rebound
• SPDR Equal-Weight Biotech ETF (XBI) – a broader, "benchmark" pick 29% off its highs
• Intellia Therapeutics (NTLA) -- portfolio took a 90% profit in this one back in June

The portfolio also sold CRISPR Therapeutics (CRSP) because Kevin thinks this name may stay stuck at $100 for some time. He’s willing to get back in after more data is released. NTLA is basically a swap for CRSP. Read the complete commentary for a lot more about all of these moves, including some analyst reaction on the sell that you should read before taking action.

Technology Innovators: The portfolio picked up a buyable dip on Monday, but it’s a bit risky. Virgin Galactic Holdings (SPCE) is a vertically-integrated aerospace company pioneering human spaceflight for private individuals and researchers. The stock really tumbled on Friday and was down again today, but Brian thinks the sell off is overdone. In fact, he considers a recent analyst downgrade as “almost like a dinner bell going off”. Once it returns to the mid-$20S, the editor will decide to either take profits or let it ride into the $30S. Take a look at the complete commentary for more.

Options Trader: The premium has now doubled for the Western Alliance (WAL) option... so you know what that means. It’s time for Kevin to pull profits and reposition into a new, further out option with the original investment amount. Therefore, he sold to close the March 105.00 Call in WAL for 97.7% and then bought to open the March 120.00 Call. In other news, the portfolio also bought to open a February 210.00 Call in General Dynamics (GD), which is part of the highly-ranked aerospace & defense space (Top 31% of the Zacks Industry Rank). GD is also a Zacks Rank #2 (Buy) with a Zacks VGM score of “B”. Read the full write-up for more on these moves.

TAZR Trader: With revenue growth of 30% and a valuation under 15x sales, Kevin was already a fan of BigCommerce (BIGC). He considers it to be a “lil’ Shopify” with plenty of room to prosper on the vast landscape of software platforms for online businesses. But the editor really appreciates that PayPal (PYPL) is promoting its relationship with BIGC right as the company found good support at $48. So the editor decided to add BIGC on Monday. Make sure to read all about this partnership and more in the full write-up.

Zacks Top 10 Stocks: According to a Wall Street Journal article, the luxury department store Saks Fifth Avenue is looking into taking its e-commerce business public. And the valuation? $6 billion! That’s six billion dollars! If Saks Fifth Avenue’s online business is worth that much, just think what Macy’s (M) would be worth. That’s exactly what investors were mulling over on Monday when they lifted shares of the country’s largest department store by over 17.5%. Needless to say, this portfolio had the best performer among all ZU names in today’s session.

Black Box Trader: Three names were swapped out in this week's adjustment. The stocks that were sold on Monday were:

• Tronox (TROX, +3.5%)
• AutoNation (AN)
• Cleveland-Cliffs (CLF)

The new buys that filled these spots included:

• ExxonMobil (XOM)
• Steel Dynamics (STLD)
• Stellantis N.V. (STLA)

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

Have a Good One,
Jim Giaquinto

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