S&P Off Record High, Dow Down 300 Points as Jobs Data Begins

·5-min read

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Remember when the S&P put together SEVEN straight sessions of new highs back in late June/early July? Well, that’s not going to happen here in early August, as the index was unable to follow through on yesterday’s gain and finished Wednesday’s session in the red.  

It was off by 0.46% to 4402.66 after reaching a new high on Tuesday by less than one point, though it is still up for the week as we pass the halfway point. However, the biggest loser was the Dow, which dropped 0.92% (or about 323 points) to 34,79.67. The index gave back all of yesterday’s advance and then some.

The NASDAQ managed to stay on positive ground by increasing 0.13% (or more than 19 points) to 14,780.53, which adds onto Monday’s 0.55% rise.

The ADP employment report was released today… and there was really nothing to write home about. Private payrolls added 330,000 in July, which was well off of expectations for closer to 700K. This is the first in a trio of reports on labor coming in the back half of this week. Tomorrow brings the jobless claims number and Friday is, of course, the Government Employment Situation.

But the ISM Services report was quite different. It came to a record 64.1 in July, as people feel more comfortable heading out to places like restaurants, sporting events, concerts, casinos and other gatherings. The print improved upon 60.1 in June and jumped above expectations of 60.5. As with ISM Manufacturing, anything over 50 is expansion.

Meanwhile, earnings season continues to show “all-around strength, with aggregate total quarterly earnings on track to reach a new all-time record and impressive momentum on the revenue side,” according to our Director of Research Sheraz Mian.

For the S&P companies that have already reported, more than 87% beat earnings estimates while 86.5% topped revenue expectations. Make sure to read Sheraz’s new Earnings Trends piece titled “What’s Happening on the Earnings Front”.

Today's Portfolio Highlights:

Home Run Investor: Prices are high for new and used cars these days, so people may hang onto their older vehicles for a while longer. That should benefit an OE manufacturer of automotive parts like Driven Brands (DRVN), which provides things like paint, collision, glass, vehicle repair, oil change, maintenance and even car washes. DRVN has crushed earnings expectations in each of the last two quarters. Furthermore, earnings are expected to grow 90% this year with a sales growth estimate of $1.4 billion (+54% from the previous year). Expectations are positive for next year as well. Analysts have raised estimates in just the last week, which suggests this Zacks Rank #3 (Hold) could improve to a #2 (Buy) or better moving forward. The addition of DRVN brings some diversification to the portfolio and also gets it back up to 14 names, which is just one shy of being fully invested again. Read the full write-up for more on today’s addition. In other news, this portfolio had a top performer today as Camping World Holdings (CWH) rose more than 7%.  

Surprise Trader: You can bet that a lot of people went to a steakhouse when restaurants finally re-opened. And some of those locations were certainly operated by Ruth’s Hospitality Group (RUTH). The company is the largest fine dining steakhouse company in the U.S. with over 150 Ruth’s Chris Steak House locations worldwide. This Zacks Rank #2 (Buy) has beaten earnings estimates three times and matched once in the past four quarters. The most recent surprise was a healthy 160%. And now the company has a positive Earnings ESP of 33% for the quarter coming before the bell on Friday, August 6. In addition to all this, RUTH also is displaying Dave’s favorite type of divergence, as earnings are moving up while the stocks comes down. The editor added RUTH on Wednesday with a 12.5% allocation, while also selling Kennametal (KMT) for a slight loss in less than a week. Read the complete commentary for more on today’s action.

Blockchain Innovators: A solid second-quarter report made eXp World Holdings (EXPI) the best performing stock among all ZU names on Wednesday. This real estate business announced a positive surprise of 380% on revenue that improved 183% year over year to just under $1 billion. The topline also bettered the Zacks Consensus Estimate by more than 50%. Shares of EXPI surged nearly 36% today. When Dave bought this name back in March 2020, he was “willing to take a chance” with an innovative company that had already transitioned to the cloud and was on the verge of profitability. Well, that chance seems to have paid off as EXPI is up 1,022% in the portfolio since being added!

Healthcare Innovators: While Blockchain Innovators had the biggest single mover of the day, this portfolio actually had three of the top five performers on Wednesday. Those solid advances came from Editas Medicine (EDIT, +9.4%), Invitae Corp. (NVTA, +8.5%) and Pacific Biosciences of California (PACB, +6.4%).

All the Best,
Jim Giaquinto

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