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Stocks Mixed, Investors Optimistic: What Wall Street's Saying

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Stocks were mixed Wednesday, with major indices seeing support from social media stocks enjoying an advertising tailwind. Investor sentiment is generally strong.

The S&P 500 fell 0.22%, as most sectors fell. The index’s down-move would have been worse without the help of a few social media stocks. The 10-Year Treasury yield rose to 0.82%, up from 0.71% a few days ago. Yields rise when prices fall. Investors are confident that the economic recovery will remain speedy, even if it has been briefly interrupted in the third quarter.

Most large cap value sectors like consumer discretionary, industrials, banks and oil, fell a few tenths of a percentage point. The S&P 500 is up about 10% in the past month in a broad-based rally and Canaccord Genuity’s Chief Market Strategist Tony Dwyer says almost 60% of S&P 500 stocks are trading above their 50-day moving averages and that he would not recommend adding equity market exposure until that level drops below 40%.

In the absence of a major tailwind seen on the fiscal stimulus and coronavirus vaccine fronts, investors are allowing for election-related volatility to prevail for the very near-term. The S&P 500 is down about 1% in the past 5 days.

Shares of Snap  (SNAP) - Get Snap Inc. Class A Report rose 28% on an impressive revenue and earnings beat, as advertising revenue is returning to pre-pandemic levels, partly as advertisers shift away fro traditional mediums like television and into digital ones. Facebook  (FB) - Get Meta Platforms Inc. Report and Google  (GOOGL) - Get Alphabet Inc. Report, soon to report earnings, rose on the industry tailwind to the tune of 4.2% 2.3%, respectively. This provided support for the major indices.

One negative in tech, Netflix  (NFLX) - Get Netflix Inc. Report shares fell 6.9%, as management flagged the pull-forward of subscriber adoption in early 2020 as a result of the at-home environment. Subscribers added for the quarter came in at just over 2 million, down from 15 million in one quarter earlier this year and management said the year-over-year declines in subs adds will continue through the first half of 2021. Analysts still see Netflix as a one of the best secular growth stocks to own in tech today, even as emerging competition gets the attention of management.

Here’s what Wall Street’s saying:

Nigel Green, CEO, deVere Group:

"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.”

Hank Smith, Head, Investment Strategy, Haverford Trust:

"The market is taking a well needed pause. We have come a long way since march 23. It’s healthy to have a pause. The odds of something worse than a pause like a bear market are very small. Bear markets come in anticipation of recessions. We have the distinct possibility that at some point in 2021, we have an effective and accepted vaccine and advanced therapeutics and when that happens, you’re going to see an economy explode higher with the unleashing of pent-up demand based on a surge of confidence and oh by the way, you still have all this monetary and fiscal stimulus. In anticipation of that you will have for real a rotation to value.”

Venu Krishna, U.S. Small and Mid Cap Strategy, Barclays Research:

"Our selections are seeing the potential for higher levels of investment in the near future: In our thirtieth edition of Small & Mid Cap Selections, we are seeing a focus on stronger-than-expected earnings in 20Q3, increased acquisitions, and capital raising in the low rate environment. Our Small & Mid Cap Selections of 20 stocks offer a median upside to price target of 27%: The median upside case is 57% while the median downside case is -21%.” 

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