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Mixed Beginning to Week Full of Earnings & Data

The first day of August 2021 saw a late-day selloff that left us with mixed results, as we begin a week that’s overflowing with earnings reports and economic data.

The NASDAQ managed to hang on to a gain by the skin of its teeth on Monday by rising 0.06% (or a little more than 8 points) to 14681.07. The Dow advanced by more than 250 points earlier in the day to reach an intraday high, but finished with a loss of 0.28% (or around 97 points) to 34838.16. The S&P was off 0.18% to 4387.16.

The market had a ‘blah’ ending to July on Friday as well, which led to losses for all the major indices for the week. However, July was a different matter with the S&P rising 2.3% for its sixth straight month of green while the Dow and NASDAQ each advanced more than 1%.

The delta variant continues to unnerve investors as infections are on the rise, which is all the more disheartening since many believed that the pandemic was on the way out. All things considered though; the market is handling the spike rather well on hopes that it will be short-lived.

Another contributor to today’s malaise was likely a few uninspired economic reports. ISM Manufacturing for July came in at 59.5, which was less than June’s 60.6 and below expectations of around 61. However, it remains solidly above 50, which suggests expansion. Also, construction spending for June gained 0.1%, which is a reversal from a 0.2% loss in May but short of expectations at 0.4%.

And it certainly didn’t help when Fed Governor Christopher Waller said a taper announcement could be made in September if the next two jobs reports are strong. That’s a lot sooner than investors wanted, though it is only Mr. Waller’s opinion.

With that being said, we are having a very solid earnings season, despite some disappointments like Amazon (AMZN). According to our Director of Research Sheraz Mian, nearly 60% of S&P companies have reported with 89.3% beating earnings estimates and 87.6% topping revenue estimates. Check out his brand new Zacks Confidential article titled: "Earnings Are Strong & Getting Stronger".

And earnings season isn’t done yet! The FAANGs may be in the past, but there are still well over 1,000 names going to the plate this week. Some of tomorrow’s big reports include Alibaba (BABA), Eli Lilly (LLY), Amgen (AMGN), BP (BP) and ConocoPhillips (COP), just to name few.

And remember we’ll be getting a lot of economic data throughout the week, finishing off with the Government Employment Situation report on Friday.

Today's Portfolio Highlights:

Surprise Trader: It looks like Beacon Roofing (BECN) is all set for a sixth straight positive surprise. The company is the largest distributor of residential and non-residential roofing materials in the country. There's a healthy Earnings ESP of 9.48% for the quarter being reported after the bell on Thursday, August 5. Dave added BECN on Monday with a 12.5% allocation, while also selling Graco (GGG) for a slight profit in two weeks to make room for more buys. Read the full write-up for more.

TAZR Trader: For a little special surprise to begin the week here, payment processor Square (SQ) reported its quarterly results this weekend (instead of August 5). The company beat on both the top and bottom lines. The early release was in conjunction with another big piece of news from SQ, namely its intention to acquire ‘buy now, pay later’ platform Afterpay. The deal is worth approximately $29 billion. According to SQ, this move will help “accelerate strategic priorities for its Seller and Cash App ecosystems”. In other words, this addition will help the payment processor become an even bigger player in fintech. It also helped SQ become a double-digit performer today with a nearly 10.2% return. The stock is now up approximately 31.3% in the portfolio since originally being added in late March.

Black Box Trader: Lots of changes in this week's adjustment as the portfolio swapped SEVEN of the ten names. And ALL of the stocks that were sold on Monday brought a profit. The positions that left today were:

• Covanta Holding (CVA, +9.6%)
• Steel Dynamics (STLD, +7%)
• Halliburton (HAL, +5.4%)
• LKQ Corp. (LKQ, +5.2%)
• L Brands (LB, +3.3%)
• Nike (NKE, +2.4%)
• Santander Consumer (SC, +1.4%)

The new buys that filled these spots included:

• Antero Resources (AR)
• AutoNation (AN)
• ClevelandCliffs (CLF)
• HCA Healthcare (HCA)
• Interpublic Group of Cos. (IPG)
• OneMain Holdings (OMF)
• Skechers (SKX)  

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

All the Best,
Jim Giaquinto

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