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Stocks closed mostly higher yesterday led by the tech-heavy Nasdaq and small-cap Russell 2000.
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research
  

Tech Rebound Lifted Stocks Yesterday, More Earnings On Deck For Today

Stocks closed mostly higher yesterday led by the tech-heavy Nasdaq and small-cap Russell 2000.

Big tech was the drag on Monday. But they were the leaders yesterday.

The back-and-forth in tech shows investors are still sorting through the opportunities and costs associated with the AI boom. Strong demand remains a positive. But expectations are high, and investors want to see that rising sales will translate into higher profits and cash flow.

After the close yesterday, tech got some good news when Advanced Micro Devices posted a positive EPS surprise of 7.73%, and a positive sales surprise of 1.89%. That translated to a quarterly EPS growth rate of 74.2% vs. this time last year, and a sales growth of 44.6%. They upped Q4 rev guidance to a midpoint of $17.0 billion vs. the consensus for $16.29B for 4.36% lift. CEO Lisa Su said she expects revenue to "accelerate further in the fourth quarter." That was seconded by CFO Jean Hu when she said the outlook reflects "accelerating revenue and earnings growth" driven by demand across the data center portfolio. Data center revenue reached a record $8.5B, up 97% y/y. They also noted that margin expansion continued with GAAP gross margin at 54% and non-GAAP gross margin at 56%. AMD was up 3.65% in the regular session before earnings, and was up another 8% in after-hours trade following earnings.

Arista Networks reported after the close as well and posted a positive EPS surprise of 11.11%, and a positive sales surprise of 10.41%. That equated to a quarterly EPS growth rate of 60.0%, and a sales growth of 58.4%. They also guided Q4 rev to a midpoint of $3.95B vs. the consensus for $3.59B for an increase of 10.0%. CFO Jayshree Ullal called it "the highest year-over-year revenue growth since our IPO and record profitability." They too noted that margins expanded with GAAP operating margin at 44.9%, up from 42.4% a year ago; and non-GAAP operating margin at 49.1%, up from 48.6%. ANET was up 3.52% in the regular session, and jumped by more than 13% in after-hours trade.

Today we'll hear from another 531 companies on deck to report, including McDonald's, Novo Nordisk and Uber before the open, along with ARM Holdings and Qualcomm after the close.

In other news yesterday, Factory Orders rose 1.8% in September vs. last month's upwardly revised 0.3% (from 0.1%), and views for 1.2%.

And the Job Openings and Labor Turnover Survey report (or JOLTS for short) rose to 7.523M job openings vs. last month's 7.19M and estimates for 7.16M.

Today we'll MBA Mortgage Applications, the PMI Composite report, the ISM Services Index, and the ADP Employment report.

The employment report that everybody is really waiting for, however, is Friday's Employment Situation report by the Bureau of Labor Statistics (BLS).

In the meantime, we'll get plenty more earnings and the usual docket of economic reports.

And, of course, the market will be digesting the midterm elections.

Remember, regardless of politics, stocks typically rally after midterms. Since 1950, between election day and the end of the year, it's been higher 68% of the time. And looking out over a 12-month period from midterms, the odds improve even more dramatically with the S&P up every time with an average gain of more than 15%.

So I'm looking forward to a strong finish to the year. And another bullish year next year as well.

See you tomorrow,

, Zacks Investment Research

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