Stocks Soar As Post-Midterm Election Rally Begins
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Stocks closed sharply higher yesterday with all of the indexes in the green. The Dow was the biggest gainer adding 3.03% yesterday. The other indexes were each up about 1.5%.
The post-midterm election rally has begun.
In spite of the broad gains, many AI related names finished in the red including SanDisk (-7.91%), NVIDIA (-3.17%), and CoreWeave (-9.90%). The narrative yesterday is around concern there could be new data-center regulation and permitting requirements from the new political body that could slow down expansion. Granted, there was already pushback before the election. So this is not new. But it did bring it into sharper focus.
Although, I should note, that one of the reasons why stocks often rally after midterms is that it usually produces divided government, making major new legislation more difficult to pass, thus putting more emphasis on negotiations and compromise. As they say, "markets like gridlock."
While AI took the brunt of the selling yesterday, plenty of big-tech names soared, especially mega-caps like Microsoft (+6.68%), Apple (+5.31%), and Amazon (+6.12%).
Software rose as they are considered a beneficiary of AI without the infrastructure risk. Same with Consumer-tech. And Healthcare was another winner yesterday. They had lagged much of the AI rally earlier in the year and is considered under-owned.
Earnings season continues.
Yesterday before the open, McDonald's posted a positive EPS surprise of 6.25%, and a negative sales surprise of -1.71%. That translated to a quarterly EPS growth rate of 10.9% vs. this time last year, and a sales growth of 1.13%. They also announced a 4% quarterly dividend increase to $1.93 per share. They were up 6.53% yesterday.
Uber also reported before the open and posted a negative EPS surprise of -73.40%, and a positive sales surprise of 0.20%. That equated to a quarterly EPS growth rate of -92.0%, and a sales growth of 9.65%. Although, it is worth noting that GAAP EPS was $0.25. And it included a $476 million pre-tax loss from revaluing equity investments. The prior year EPS of $3.11 was due to one-time gains where they benefitted from revaluing investments. On a non-GAAP basis, EPS was up 35% y/y to $0.88, showing the operating business improved. Management noted that autonomous vehicles are becoming a real business line. They said mobility demand is strong and they are investing to recruit more drivers. And that delivery bookings are growing with a 23% increase. They were up 4.91% yesterday.
After the close, we heard from Qualcomm. They posted a positive EPS surprise of 0.46%, and a positive sales surprise of 2.92%, for a quarterly EPS growth rate of -27.7%, and a sales growth of -7.36%. They guided the current quarter EPS to a midpoint of $2.25, which was below estimates for $2.27. It's worth noting that before the open yesterday, SpaceX announced a deal with them to provide Starlink Mobile. Qualcomm will supply its Dragonwing Cellular Infrastructure platforms. The agreement was described as a multi-year deal. They were up 5.33% in the regular session, but were trading lower by -6.50% in after-hours trade.
Today we'll hear from another 671 companies on deck to report, including Airbnb, Cloudflare, and Cardinal Health, to name a few.
In other news, yesterday's ADP Employment Report showed private employers added 86,000 jobs in October vs. a revised 86,000 in September (originally 90,000), and beating the consensus for 70,000.
Yesterday's post-election rally is off to a strong start.
While it won't be without volatility, I'm expecting a strong finish to the year.
See you tomorrow,

, Zacks Investment Research
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