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Good Earnings News Drives Positive Bias



Chief Market Analyst

The initial move today should be higher based on the directional activity provided by the futures market.

Currently, the S&P 500 futures are up 13 points and are trading 0.4% above fair value, the Nasdaq 100 futures are up 91 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up  20 points and are trading 0.3% above fair value.

That firmer foundation rests largely on an appreciation for better than expected earnings news, although a bubbling up of reports discussing a surge in COVID cases in Europe, South Korea, China, and the Upper Midwest in the U.S. has acted like a governor on the stock market’s engine.

Some of those concerns have seemingly risen to the surface of late, evidenced by the underperformance of cyclical sectors and travel stocks, fading oil and copper prices, a strengthening dollar (and weakening euro), and a dip in long-term rates.

This morning’s economic data should help temper some of the growth concerns.

Initial jobless claims for the week ending November 13 decreased by 1,000 to 268,000 ( consensus 260,000), which was the lowest level since March 14, 2020. Continuing jobless claims for the week ending November 6 decreased by 129,000 to 2.080 million, also the lowest level since March 14, 2020.

The key takeaway from the report is that the low level of initial claims should help set expectations for another nice pickup in hiring activity since it covers the week in which the survey for the November Employment Situation Report was conducted.

The Philadelphia Fed Index for November shot up to 39.0 ( consensus 22.0) from 23.8, led by an uptick in the New Orders Index to 47.4 from 30.8 and an increase in the Prices Paid Index to 80.0 from 70.3.

Still, the 10-yr Treasury yield is up just one basis point to 1.61%.

Separately, there has been a persistent bid in the mega-cap stocks and many of the growth stocks this week. NVIDIA (NVDA) is keeping that bid alive today, too.

NVDA is up 8.2% and a key driver of the Nasdaq 100 futures after reporting some impressive third quarter results, which were replete with better than expected fourth quarter revenue guidance and upbeat commentary about demand trends for its products.

Cisco (CSCO), meanwhile, is a drag. It failed to impress with its fiscal first quarter results and fiscal second quarter guidance, laying some blame on component shortages. Shares of CSCO are down 6.7%. Alibaba (BABA) is another big laggard. It is down 6.4% after coming up well shy of earnings estimates for its fiscal second quarter and issuing disappointing full-year revenue guidance.

There was a slate of good earnings news from the retail industry, which has been the case all week. Macy’s (M)Kohl’s (KSS)The Children’s Place (PLCE)Victoria’s Secret (VSCO)Bath & Body Works (BBWI), and BJ’s Wholesale (BJ) all posted much better than expected earnings results and they are all trading nicely higher in pre-market action. M and KSS, for example, are up 10.8% and 9.2%, respectively.

Originally Posted on November 18, 2021 – Good Earnings News Drives Positive Bias

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