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Stocks Bounce Back While Waiting for Big Tech Earnings

We finally got a bounce back from the recent selloffs on Thursday, as the market digested of deluge of (mostly positive) earnings reports and economic data.

The NASDAQ jumped 1.64% (or about 180 points) today to 11,185.59. All of the FAANGs were higher in preparation of four reports coming after the bell.

Facebook (FB) was up nearly 5%, while Apple (AAPL) and Alphabet (GOOG) each gained more than 3% and Amazon (AMZN) rose 1.5%. Even Netflix (NFLX) moved higher 3.7% after announcing a rise in prices.

Meanwhile, the S&P increased 1.19% to 3310.11 and the Dow advanced 0.52% (or around 140 points) to 26,659.11. These indices broke their 3-day and 4-day losing streaks, respectively.

Of course, these gains are just a drop in the bucket compared to what the market lost in the previous three days. For example, the Dow was off 1800 points through Wednesday. Nevertheless, the first step is always to stop the bleeding.

Economic data provided a bit of a suture on Thursday, especially with third-quarter GDP beating expectations and soaring by 33.1%. Also, jobless claims came in at 751,000, which was the second straight week below 800K and better than expectations.

This data, especially the GDP, suggests that the economy responded well to restrictions being eased from the pandemic. At the same time, though, these numbers are rather bittersweet as they come during rising coronavirus cases and the threat of new lockdowns.

However, the bigger reason for the bounce may have been excitement over FAANG Day. After the bell, FB, AAPL, AMZN and GOOG all reported their quarterly results. They beat expectations, but there were a few hiccups.

The market seems most impressed with GOOG, which is up about 8% after hours. But AAPL is down more than 5% as iPhone sales were lower and AMZN is off 1.5%. FB has slipped less than 1% perhaps due to fewer users in the quarter. (All of these numbers are as of this writing.)

As Jeremy said in Counterstrike today: “Tech is looking weak after hours, but we will have to see how things shape up. When you have Facebook, Amazon, Apple and Google all on one day, some weird moves can happen.”

Tomorrow will be interesting.

Today's Portfolio Highlights:

Income Investor: The portfolio added two names on Thursday that are in the middle of extensive capital spending plans that should benefit investors for years to come. Firstly, Duke Energy (DUK) is one of the largest utility companies in the U.S. with plans to eventually become a renewable energy force in the next several years. That should be beneficial to its already impressive dividend growth. DUK has paid a dividend for 94 consecutive years and raised the annual payment for the last 14. It currently yields 4.2%.

The other buy is Nucor (NUE), one of the largest and most diversified steel makers in the country. The company plans to spend $1.7 billion in 2020 alone as part of its capital spending plan, which includes expanding its steel mills. Maddy considers NUE to be a play on infrastructure spending, since the company should be a supplier once these large projects are underway. NUE has increased its annual payout for 47 straight years and has a dividend yield of 3.5%. Learn a lot more about these moves in the editor’s complete commentary.

Blockchain Innovators: The past two quarters have seen unexpected profits and triple-digit surprises for Brightcove (BCOV), a Zacks Rank #2 (Buy) provider of cloud content services for publishing and distributing professional digital media. That description alone explains the importance of blockchain in this business. But if you want even more proof, the company’s CEO actually owns a blockchain-based bank. The more than 300% earnings growth forecast for this year is nice, but that’s more a result of its low bar. Dave is much more impressed with the 20% growth for next year. Therefore, the editor added BCOV on Thursday and got out of the underperforming Celestica (CLS) position. Read the full write-up for more.

Stocks Under $10: Ever since SunOpta (STKL) was added back in early June, this natural & organic food, supplements and health & beauty company has been a strong performer for the portfolio. However, the stock is starting to show some weakness, so Brian decided to sell it on Thursday to secure a nice return of more than 40% in just under five months. He also sold the underperforming Tecnoglass (TGLS) and Costamare (CMRE) positions. The service is now a bit underweight, so the editor may be adding a new one tomorrow.

TAZR Trader: There were two big pieces of news for Shopify (SHOP) this week. Earlier today, the cloud-based ecommerce platform reported strong third-quarter results with an earnings beat of 125% and a revenue surprise of 15.7%. The company withdrew its guidance, but that’s rather normal during this pandemic. The other bit of news came earlier this week when SHOP announced a commerce partnership with TikTok that “brings the world’s leading destination for short form video to Shopify’s more than one million merchants”. Kevin thinks analysts will be re-working their models on SHOP after these recent developments. He decided to add a small, 5% allocation in SHOP on Thursday and will pick up more on any volatility moving forward. Read the full write-up for specifics on this new addition, along with insights from a couple of analyst upgrades earlier this month.   

Surprise Trader: There are other things happening on November 3 besides the election. For example, steel company Ternium (TX) will be reporting earnings. This Zacks Rank #2 (Buy) has a positive Earnings ESP of 16.91% for the quarter coming after the bell on Tuesday. It had a nice beat of over 230% last time. Dave added TX on Thursday with a 10% allocation, while also selling (FLWS). The full write-up has more on today’s action.

Value Investor: We’re having a pretty good earnings season so far, despite the recent selloffs, rising coronavirus cases and election volatility. Case in point, social media staple Pinterest (PINS) reported strong third-quarter results, which included revenue that jumped 58% year over year and earnings of 13 cents that trounced the Zacks Consensus Estimate of a penny. Monthly active users were up 37%. And the company says revenue growth of 60% this quarter is a possibility. Shares of PINS were up nearly 27% on Thursday, which easily made it the top performer of the day among all ZU names. It’s also the #1 stock in this portfolio with a surge of more than 214% since its addition in late May.

Until Tomorrow,
Jim Giaquinto

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