Back to top

8 1/2 Weeks: A Stormy Affair of New Highs

Read MoreHide Full Article

Friday, November 10, 2017

OK, so it’s not quite the Mickey Rourke/Kim Basinger sexy thriller (that would be “9 1/2 Weeks”). Still, an historic rally in major equities indexes looks to finally be calling it quits, or at least taking a breather. Things could turn around today, but futures are down in the pre-market following a 101-point loss in the Dow yesterday. Further, there don’t look to be any upward sparks to shake off this new bearishness cropping up.

For sure, companies like nVIDIA (NVDA - Free Report) , which reported after the bell yesterday, look to be world-beaters: outperforming earnings estimates by 41.5% and raising Q4 guidance. Even Walt Disney Co. (DIS - Free Report) is up 2.5% in today’s pre-market, after failing to meet estimates in its latest quarterly report, on new signals from CEO Bob Iger that the entertainment media giant is making the hard choices to switch to a streaming model of entertainment service. This would appear to tighten competition for Netflix (NFLX - Free Report) , which is trading down this week.

And it’s worth pointing out that Alibaba’s (BABA - Free Report) Singles Day will generate a metric tonnage of sales in China tomorrow — the Chinese “equivalent” to Amazon’s (AMZN - Free Report) Prime Day, although there is nothing equivalent about $17.8 billion in retail sales in one day, which is what Alibaba raked in on November 11, 2016. This year, analysts project even bigger sales.

Technical trading metrics in Japan yesterday caused a sell-off, removing a tailwind for U.S. indexes from the world’s third-largest economy. Domestic tax reform and corporate tax cut legislation has backed off from its “slam dunk” status this week on projected difficulties between House and Senate bills, plus a CBO analysis indicating the tax cuts are too expensive. And more rumors swirl regarding Special Prosecutor Robert Mueller’s investigation into Russian collusion with the Trump campaign that further indictments can be expected, throwing a monkey wrench into an already challenged environment on Capitol Hill.

The Dow Jones Industrial Average has risen 31% since this time last year. The Nasdaq is up almost 34% over the same one-year period, and the S&P 500 has driven up 24%. Wouldn’t it make sense for market participants to take a breather here?

After all, most of the good news from Q3 earnings season is already wrung out; we see more retailers reporting in the coming week or so, but this sector can’t hold a candle to the growth we’ve seen it tech and elsewhere this quarter. Also, Q3 earnings allow analysts to do pretty easy math regarding full-year estimates with only one quarter remaining on the calendar. Without new sparks to push the indexes forward — although a recent spike in oil prices might provide something of a boost — we may see something resembling investor exhaustion, at least temporarily.

After all, even Mickey Rourke and Kim Basinger had to take a break every once in awhile. Happy Friday, and Happy Veterans Day!

Mark Vickery
Senior Editor

Questions or comments about this article and/or its author? Click here>>

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7% and +90.2%, respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

More from Zacks Ahead of Wall Street

You May Like