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Market Observations for October 22th, Stocks to Watch

US markets closed sideways on Thursday as a little bit before the end of the session the S&P500 reached a new record hi, finishing .30% higher. The Dow was more or less flat with .02% and the Nasdaq was boosted by techs, mostly TSLA, ending with a .62% gain. Stocks rallied for a sixth straight day, fueled by the solid corporate results. However, breaking a historical hi is not an easy job, especially considering the negative surrounding factors as higher inflation, pending tapering in November, supply shocks, ongoing pandemic measures, higher Ts yields, higher energy prices. Logically and statistically reasoning, a lot of resistance and retesting is expected on the historical benchmark index hi, and once the earnings season is over, investors are supposed to pay more attention to the less-optimistic factors.

Existing home sales in the US rose in September with the quickest growth rate within a year, in light of the favorable low mortgage interest rates and the slight slow-down in real estate prices. The new jobless claims reached a new pandemic low of 290K, beating analysts’ expectations on the positive side. The bothersome part of the picture was another increase in 10 year Treasuries yields up to 1.683%, closing a psychological threshold of 1.7%, where world-wide bond-funds would trigger hedging instruments and further stimulate an aggressive selling of US government debt. WTI Crude Oil finished at USD82 and the Brent is trading at more or less USD84 this morning, providing less concern over rocketing oil prices.

TSLA was the leading star in the session with new his in its gross margin in Q3, reaching as much as 30%, despite falling short of revenues expectations. Stocks rose with 3%, leading the gains in the Nasdaq, which were also supported by HP’s strong corporate results. MSFT, NVDA and NFLX added respectively 1.09, 2.67 and 4.43% to their market cap, with NFLX continuing to reap rewards several days after posting its strong Q3 performance. A list with fundamentals and market multiples of the best-presented streaming-segment traded on the US markets was presented in previous articles. IBM reports, however fell short of expectations and the company was a serious loser, shedding off 8% from its market cap.

The after-hours trading session found investors less excited about earnings and more worried about inflation and rising bond yields. Overnight the MSCI Asia Pacific Index fell 0.6% while Japan’s Topix index lost 1.3%, triggered mainly by the Evergrande Group Crisis – the giant’s shares lost more than 10% after a deal to sell a stake fell trough. Snap Inc, the owner of Snapchat, also tumbled on a worsened earnings outlook, hurting other tech shares too.

Today at 9.45am EST comes out the Flash Manufacturing PMI, and at 11am Fed Chairman Powell Speaks, so it is highly recommended to exit short term positions due to at least 30 min extreme volatility during the speech.

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