Day Traders Diary

10/20/21

The major averages closed mixed with the Dow Jones Industrial Average jumping to a record on Wednesday as investor sentiment was boosted by better-than-expected earnings reports and a new record for bitcoin. The Dow gained 152 points, or 0.43%, to about 35,609. The S&P 500 added 16 points or 0.37% while the Nasdaq Composite shed 7 points or 0.05%.

The market climbed a wall of worries over the last two months. Fears over the delta Covid surge, supply chain hiccups, a China property crisis, the Federal Reserve signaling the removal of stimulus and surging inflation reports rattled investors. But the Dow's pullback from records was not that severe, reaching about 5% at its lowest closing point.

Sam Stovall, chief investment strategist at CFRA, said the market was continuing its rally from last week, which he said started with a weaker-than-expected producer prices reading and better-than-expected bank earnings.

Stovall pointed out that the S&P 500 could also hit a record high soon, which would be a bullish sign for the market going forward.

Verizon was the biggest gainer in the Dow, jumping 2.5% after earnings topped estimates for the third quarter and the telecom giant raised its forecast because of growing 5G adoption. Biotech Biogen shares edged higher after it beat estimates on earnings and revenue and raised its full year guidance.

More than 70 S&P 500 components report earnings this week and so far reports are going very well. Through Tuesday, 86% of the S&P 500 companies reporting have topped estimates, according to figures from The Earnings Scout. Third-quarter earnings are on pace for a 35% increase from a year ago, according to Earnings Scout. IBM, Tesla, CSX and Las Vegas Sands are among the names set to report after the market closes.

Bitcoin rose as high as $66,893 Wednesday, a new all-time high for the cryptocurrency, following comments Paul Tudor Jones made on CNBC's "Squawk Box" calling bitcoin his preferred inflation hedge over gold. Bitcoin has been climbing for four weeks amid positive regulatory developments and anticipation of the first bitcoin-linked ETF. The ProShares Bitcoin Strategy ETF began trading Tuesday.

The bitcoin rally is a signal of a strong risk-on environment, according to Fundstrat's Tom Lee, who also said the stock market could still rally more than 6% by the end of the year despite the "jagged year of progress" it's had. He upped his S&P 500 price target 100 points to 4,800, citing declining Covid cases and economic resilience.

Netflix posted its hotly-anticipated third-quarter earnings report on Tuesday after the market closed, with the streaming giant adding 4.4 million subscribers during the period. Wall Street analysts expected 3.84 million additions, according to estimates from StreetAccount. However, the shares, which are up 20% in the last three months, were down more than 1%.

Deutsche Bank downgraded Netflix after the report, saying its stock valuation was hard to justify with revenue growth set to slow next year. The firm also said strong fourth quarter subscriber additions are already baked into the stock.

United Airlines also posted quarterly results after the bell on Tuesday, with the company beating analyst expectations on the top and bottom line amid an ongoing rebound in travel demand. United shares retreated slightly Wednesday.

Ford shares were up 4% after Credit Suisse upgraded the auto company on its EV shift and predicted a 30% rally in the stock. PayPal lost more than 5% on a report that it could buy the social media company Pinterest. Pinterest shares soared more than 11%.