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New Highs Again for S&P and Dow as Earnings Continue

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Even a sharp mid-day drop couldn’t keep this market down! Stocks managed to stay on their feet in all the Tuesday turbulence and remain on their record-setting pace. Meanwhile, the biggest week of earnings season continued with two more tech giants scheduled to report after the bell.

The S&P increased 0.18% today to 4574.79 and the Dow advanced 0.04% (or nearly 16 points) to 35,756.88. These gains came well off the highs of the session, but were enough for a second straight record for the S&P and a third straight for the Dow.

The NASDAQ is now within 1% of a new closing high, which was last set on September 7. However, it didn’t make up much ground today with an advance of only 0.06% (or 9 points) to 15,235.71.

Shares of Facebook (FB) dipped nearly 4% in its first day of trading after a mixed third quarter report last night. The social media giant slightly beat earnings estimates but missed on revenue.

Elsewhere, Tesla (TSLA) experienced its first decline in five sessions, but only slipped by 0.63%. The EV pioneer joined the $1 Trillion club yesterday and received a 100K vehicle order from Hertz (HTZ). It’s also coming off a strong quarterly report from last week that included a positive EPS surprise of 34%.

As far as economic data is concerned, consumer confidence in October turned out better than expected. The Conference Board’s index rose to 113.8, which topped forecasts and the September result of just under 110. The advance ends a three-month downtrend in this category and provides more proof that consumers are dealing with the rising inflation and supply chain issues for now.

But let’s get back to earnings since two more powerhouses reported after the bell on Tuesday. Microsoft (MSFT) and Alphabet (GOOG) both beat on the top and bottom lines in their quarterly reports. MSFT reported an EPS surprise of more than 10% and is currently flat afterhours, as of this writing, while GOOG topped by 21% but is off around 0.6% afterhours.

We get a break from the FAANGs in tomorrow's earnings schedule, but we’ll still be receiving reports from heavy hitters like Coca-Cola (KO), McDonald’s (MCD), Sony (SONY), Bristol Myers (BMY) and Boeing (BA), among hundreds of other names.

Today's Portfolio Highlights:

Stocks Under $10: Soaring oil prices make energy alternatives even more attractive, so Brian thought this was a good time to add ReneSola (SOL). This Zacks Rank #1 (Strong Buy) solar stock beat the Zacks Consensus Estimate for four straight quarters with an average surprise of 242%! Looking forward, revenue growth is expected at 25% for this year and 38% for next. Given its strong earnings history and rising margins, the editor thinks SOL is set to move sharply higher in the future. Meanwhile, the service also sold the underperforming VirTra (VTSI) position. See the full write-up for more on today’s action.  

Options Trader: The portfolio's sights are set on Cognex (CGNX), a leader in the machine vision industry. In other words, the company makes computers that can ‘see’. This Zacks Rank #2 (Buy) has a projected sales growth rate of 27.35%, which is 67% better than the industry and 140% better than the S&P. Kevin also likes the bullish symmetrical triangle pattern in its chart. He expects a breakout soon, so the service bought to open two Feb22 90.00 Calls in CGNX on Tuesday. Read the full write-up for more on today’s move.  

Surprise Trader: Rising energy prices pushed the Oil & Gas – E&P space into the Top 2% of the Zacks Industry Rank, so that's where Dave went for today’s addition. The editor picked up SM Energy (SM), which beat the Zacks Consensus Estimate by 105% in its last quarter while also posting a surprise profit. And now it has a positive Earnings ESP of 34% for its upcoming report on Thursday, October 28 after the bell. Earnings estimates for this Zacks Rank #1 (Strong Buy) are up to 33 cents for this year and $3.09 for next, suggesting a year-over-year surge of 840%! The portfolio added SM on Tuesday with a 12.5% allocation, while also selling Tractor Supply (TSCO) for a “small victory” of just under 5% in less than two weeks. Learn more about these plays in the complete write-up.

In other news, this portfolio easily had the best performer among all ZU names on Tuesday as Perion Network (PERI) soared over 31%. This provider of online advertising solutions beat the Zacks Consensus Estimate for a 12th straight quarter. The earnings surprise was over 55%, while revenue eclipsed our expectation by more than 12%. Most importantly though, PERI raised its outlook for 2021 and 2022.  

Zacks Short Sell List: Only two stocks were swapped in this week's adjustment. The positions that were short-covered included AppLovin (APP) and (JD), while the new buys that filled these spots were SunPower (SPWR) and Zurn Water Solutions (ZWS). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

All the Best,
Jim Giaquinto

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