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Stocks Inch Higher, Earnings Hit

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Stocks rose slightly as earnings continue to roll in, but the gains were muted.

The S&P 500 rose about 0.1%, with the tech-heavy Nasdaq up 0.3%. Optimism on the economic recovery has remained strong, as the 10-Year Treasury yield is up to 0.82% from 0.71% just a week ago. Yields rise when prices fall. The yield hit a post-lockdown high of 0.91% in June and has not come close to that level since.

Many sectors were up a bit Wednesday, with consumer discretionary seeing restaurants and retail stocks up a few tenths of a percentage point. Oil fell a bit, but bank stocks were p a few tenths of a percentage point to go along with an expanded yield curve.

Tech took a bit of a breather, with Netflix  (NFLX)  down 4% to $503 a share after the company posted just over 2 million subscribers added, missing analysts estimates of just over 3 million. Netflix said it is looking for a slight rebound in the current quarter, but saw a massive pull-forward of demand in the first half of the year, driven by the pandemic. Investors are pricing in near-term pressure to revenue and earnings.

Other growth tech companies may not be seeing the pull-forward of demand for at-home services to the extent Netflix has, but FAANG stocks did take a breather Wednesday.

And while other stocks were up slightly, the S&P 500 is down a bit more than 1% in the past few days and Canaccord Genuity Strategist Tony Dwyer wrote in a recent note that the U.S. market is taking a bit of technical breather after a roughly 10% run up since the end of September. Dwyer says close to 60% of S&P 500 stocks are trading above their 50-day moving averages and that he would advise adding to positions when that level goes below 40%.

Plus, "A market rally is going to be difficult to be sustained due to the enormous uncertainty created by other factors including the presidential election, a possible looming constitutional crisis in the world’s largest economy, and the growing Covid-19 infections in America and other major economies,” wrote Nigel Green, CEO of deVere Group, in emailed remarks to reporters.

Two big earnings reports to watch for Wednesday: Chipotle  (CMG)  and Tesla  (TSLA) . Chipotle earnings will show both the level to which the consumer is rebounding and the extent to which a strong digital strategy can provide an advantage for in the restaurant business. Tesla earnings could catalyze the next leg higher for the widely-followed explosive growth stock. 

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