Hi Everyone,
Even though nearly all of the main sectors gained ground in the first hours of trading, the rally ran out of steam in the afternoon, as many traders took a step back ahead of the highly-anticipated mega-cap tech earnings. The defensive utilities and healthcare stocks enjoyed inflows later in the session, with financials, tech stocks, and the real estate sector also holding up well. Communication services, materials, and industrials lagged behind the broader market, while consumer discretionaries and energy stocks finished flat in volatile trading.
Traders said that today’s session was typical of the busiest days of the earnings season, with a lot of action in individual stocks but no meaningful moves at the level of the major indices. As one trader explained, “Despite today’s all-time highs in the S&P 500 and the Dow, there was no clear intraday trend on the Street, and given the deluge of earnings in the coming days, trading could remain hectic all week.”
While Facebook’s painful drop made the most headlines today, we saw extreme post-earnings moves in other stocks and industries as well. UPS (UPS, +7.1%) hit a new all-time high for the first time since May thanks to its upbeat report, but the weak numbers of Lockheed Martin (LMT, -11.7%) led a rout among the largest defense companies. GE (GE, +2.1%) scored a four-month high after beating on both its top and bottom lines, supporting the relatively weak industrial sector.
Earnings season is in full gear this week, with all eyes on the mighty tech sector, and while tech earnings have been a mixed bag this quarter, the overall picture is as bullish as it gets. By the end of last week, over 84% of reporting companies beat on their bottom lines, with the average size of the surprises also unusually high. Revenue growth has been even stronger than the lofty expectations in the third quarter as well, so it’s no surprise that, so far, earnings season has provided tailwinds to equities.
“The secret of getting ahead is getting started.”
Mark Twain
As always, have a great evening and stay tuned!!
