S&P and Dow Step Back From Record Highs

·6-min read

After two days of record highs to begin this week, stocks deserved to take a breather on Wednesday. Investors also got a break from mega-cap tech earnings today, though we’ll be right back at it tomorrow when the final two FAANGs are scheduled to report.

The Dow slipped by 0.74% (or about 266 points) in the session to 35,490.69, ending three consecutive sessions of record highs. The S&P was off 0.51% to 4551.68, snapping two straight history-making performances. The NASDAQ broke even on Wednesday, though it was technically up by 0.12 of a point to 15,235.84.

One of the most noteworthy reports of the day came after the bell with automaking staple Ford (F), which beat the Zacks Consensus Estimate in its third quarter by more than 82%! Revenues of $33.2 billion bettered our expectations by more than 4.6%. Despite supply chain issues and a chip shortage, F raised its full-year earnings forecast.

Shares are up approximately 8.5% afterhours, as of this writing.

The indices may have taken it easy on Wednesday, but there were still new all-time highs elsewhere. Alphabet (GOOG) and Microsoft (MSFT) both reported strong quarterly results after the bell last night, including positive surprises of approximately 21% and 10%, respectively.

Shares of GOOG were up 4.8% in its first session of trading after the report, while MSFT advanced 4.2%. Both of these behemoths reached new highs in the session and helped the NASDAQ outperform its counterparts.

“Microsoft and Alphabet (Google) both shot higher off the open. These tech giants really got the Nasdaq going, but the S&P was struggling all day. So we got some divergence and rotation today, something we haven’t seen in a while,” said Jeremy Mullin in Counterstrike.

“Not too much to take away from the action today. It’s just money sloshing around under all-time highs.”

We’ll be all done with the FAANGs tomorrow afternoon. Apple (AAPL) and Amazon (AMZN) are both scheduled to report after the bell. Shares of AAPL were down about 0.3% today, while AMZN was up nearly 0.5%. But both are higher afterhours, as of this writing.

Today's Portfolio Highlights:

Home Run Investor:
The communications space has done well for one of Brian’s other portfolios (Technology Innovators), so the editor decided to try a name from the industry over here as well. Today’s addition is Ooma (OOMA), a Zacks Rank #1 (Strong Buy) that has beaten the Zacks Consensus Estimate in the past four consecutive quarters. The average positive surprise over that time is an impressive 55%. OOMA was testing $23 at the start of September, and Brian thinks the stock can get back to that level and more. The service also sold the underperforming Camping World (CWH) position today as the stock moved “past the point of no return”. Get more specifics in the full write-up.   

ETF Investor: Earnings season has shown us that the tech giants are doing just fine. In fact, the digitization trends brought on by this pandemic promises to keep the space’s strong performance continuing well into the future. Therefore, Neena thought it was a good time to return to Vanguard Mega Cap Growth ETF (MGK), which provides exposure to the largest growth stocks in the U.S. market. And that’s not an exaggeration! The fund includes Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Facebook (FB), Tesla (TSLA) and NVIDIA (NVDA). These names make up about half of the fund. MGK, which was in this service earlier this year and brought a more than 27% return, has close to $13 billion in assets and charges just 0.07% in fees. The editor also got out of iShares U.S. Home Construction ETF (ITB) as homebuilder stocks have struggled lately. Read more in the complete commentary.

Large-Cap Trader: With October winding down and November about to begin, it was time for this portfolio’s monthly fine-tuning. John replaced three positions on Wednesday, cashing in two double-digit winners along the way. The service sold Regal Beloit (RBC) for 12.7% in three months and Huntsman (HUN) for 11.6% in five. The editor also got out of Westlake Chemical (WLK) for a 5.5% return in six months. The three new buys that filled these spots are:

• Jabil (JBL) – an electronics manufacturing company
• Synaptics (SYNA) – a semiconductor company
• Covestro AG (COVTY) – a plastics-chemicals company

JBL and SYNA are both Zacks Rank #2s (Buys), while COVTY is a Zacks Rank #1 (Strong Buy). All of them are from spaces in the top 25% of the Zacks Industry Rank. Furthermore, each of these names reported a positive EPS surprise, have a low PEG ratio and should do well in the current environment. Read the full write-up for a lot more on each of these new additions.   

Counterstrike: Shares of Covenant Logistics (CVLG) plunged more than 25% lately even though this Zacks Rank #2 (Buy) reported a positive earnings surprise in its most recent release. Jeremy thinks this selling is a bit overdone for this “low market cap company that is growing pretty fast”. Therefore, it’s a classic Counterstrike opportunity. The editor added this transportation and logistics services company on Wednesday with a 4% allocation, while also selling Workday (WDAY) for a nice 11.8% return in a little under a month. Read the full write-up for more on today’s moves.

Surprise Trader: One day after Perion Network (PERI) soared double digits due to a beat-and-raise quarter, Dave decided to sell half of the position for a more than 20% return in less than a week! He’ll let the other half run for now to see how much higher it can go. On the other hand, the portfolio also got out of Canon (CAJ) as shares dropped following a “rough report”. Meanwhile, the new addition is Accel Entertainment (ACEL), a Zacks Rank #2 (Buy) that focuses on VGTs (video gaming terminals) in places like bars, restaurants, convenience stores and the like. Analysts are looking for earnings growth of more than 950% for this year on revenue growth of 125%. It has a positive Earnings ESP of 20% for a quarter that will probably be reported in the first week of November. Dave added ACEL on Wednesday with a 12.5% allocation. The complete commentary has more on today’s moves.

All the Best,
Jim Giaquinto

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