This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Chart Advisor: Conflicting Results

Investopedia

Contributor:
Investopedia
Visit: Investopedia

Tuesday, 26th October, 2021

1/ Indexes edge up as investors show ambivalence  

2/ Eli Lilly’s shares rise on upbeat outlook 

3Investors pull back from Facebook

4/ The bottom line

1/ Indexes Edge Up as Investors Show Ambivalence  

Major averages again reached highs as earnings season trundles on. State Street’s S&P 500 Index ETF (SPY) rose 0.1%, pulling back slightly from an intraday high. State Street’s Dow Jones Industrial Average ETF (DIA) likewise touched a new high intraday before pulling back to remain flat. Leading the way higher was Invesco’s Nasdaq 100 ETF (QQQ), which added 0.2%. iShares Russell 2000 ETF (IWM) shed 0.7%.  

Third-quarter earnings continue to be relatively positive, with a slate of mega-cap tech companies set to announce their quarterly results this week.  

The chart below compares the recent performance of the S&P 500 Index (SPX) with Cboe’s Volatility Index (VIX). The SPX and VIX generally have an inverse relationship, as the VIX is a measure derived from SPX option prices. The VIX is low when SPX option prices are lower because trades expect smaller SPX price changes in the future. 

SPX has recently touched intraday highs several days in a row and the VIX has remained relatively low. Currently below its long-term average, the VIX rose today, even as SPX moved higher. This could mean that while SPX continues to rise, option traders are placing more bets than previously that the index could move to the downside in the near term.  

2/ Eli Lilly’s Shares Rise on Upbeat Outlook 

Investors bid up the share prices of Eli Lilly (LLY), despite the company missing earnings per share (EPS) expectations for the fiscal third-quarter. Analysts expected $1.96 in EPS and $6.64 billion in revenue. LLY reported $1.94 in EPS and $6.77 billion in revenue. The stock rose by nearly 1.3% after LLY boosted its full-year sales and profit outlook. 

LLY stock has been on a recent uptrend, as illustrated on the chart below, which compares the recent performance of LLY with State Street’s Healthcare Sector ETF (XLV). LLY’s recent trend upward has the stock more in sync with its sector, which it had previously lagged. However, on a larger scale, LLY has outperformed XLV year-to-date, as LLY has added 49% compared to XLV’s 17% gain in that time frame. 

LLY cautioned in their quarterly report that it expects minimal revenues from its COVID-19 therapies in 2022. It’s possible that several of XLV’s top holdings could see similar effects on future revenues as the COVID-19 pandemic wanes. 

3/ Investors Pull Back from Facebook

Facebook (FB) shares slid 4% after the company missed revenue expectations in the company’s fiscal third-quarter earnings report. Market analysts had forecast $3.19 in EPS and $29.5 billion in revenue—FB reported $3.22 in EPS and $29.0 billion in revenue. This is a tumultuous time for the social media giant, as the company is focusing increasing amounts of resources on the “metaverse,” while receiving negative attention after several whistleblowers have raised concerns about the company.  

FB has largely lagged the technology sector of late. The chart below compares the recent performance of FB stock with Invesco’s tech-heavy Nasdaq 100 Index ETF (QQQ). While FB is currently on a downward trend, QQQ broke from this trend to swing upward at the beginning of October, and the gulf between the two continues to widen. 

QQQ has recently been dragged higher by Tesla (TSLA). However, if the rest of mega-cap tech earnings offer results closer to FB’s, the gap between QQQ and FB could narrow.  

4/ The Bottom Line 

Investors showed plenty of ambivalence as index prices fluctuated strongly throughout the session. Two examples of this mixed response can be found in the post earnings share activity of Eli Lilly and Facebook. Both companies fell short of analysts’ expectations, but investors bought more LLY shares and sold FB shares. 

Originally posted on 26th October, 2021

Disclosure: Investopedia

Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy.  While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Investopedia and is being posted with permission from Investopedia. The views expressed in this material are solely those of the author and/or Investopedia and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Options Trading

Options involve risk and are not suitable for all investors. For more information read the Characteristics and Risks of Standardized Options, also known as the options disclosure document (ODD). To receive a copy of the ODD call 312-542-6901 or copy and paste this link into your browser:

http://www.optionsclearing.com/about/publications/character-risks.jsp

trading top