Day Traders Diary

10/21/21

The major averages closed mixed with the S&P 500 touched a new record on Thursday, joining the Dow Jones Industrial Average in wiping out a two-month swoon amid strong profits and year-end optimism.

The S&P 500 rose 13 points or 0.3% to 4549 touching a new all-time high. The Nasdaq Composite rose 94 points or 0.62%. The Dow Jones Industrial average shed 6 points, dragged down by a 9% loss in IBM.

Tesla did a lot of the heavy lifting for the S&P 500, jumping 3% following strong earnings from the electric vehicle maker. The S&P 500 has mounted a comeback this month as booming profit reports trumped worries about inflation and a potential end to Federal Reserve bond buying. The S&P 500 is now up 1.6% for the week and 5% on the month.

Corporate America has so far had a solid profit performance in the third quarter, even as higher costs prove to be persistent. Of the 101 S&P 500 companies that have reported through Wednesday, 84% topped analysts' earnings estimates according to Refinitiv.

Tesla shares gained 3% after the electric-car maker posted record earnings and revenue in the third quarter that beat expectations with analysts raving about its strong margins.

HP Inc. jumped 7% on strong earnings and raised guidance for 2022.

Other big tech stocks also helped lift the market. Nvidia and Netflix shares soared.

Outside of tech, American Airlines added 1.6% after it posted a profit due to federal aid for the third quarter.

Jim Paulsen of the Leuthold Group noted that correlation between the inflation rate and profit margins has been positive for the past 20 years so companies may be better off than feared as they raise prices.

On the economic front, investors were encouraged by strong jobs data. Jobless claims fell to a new pandemic low of 290,000 last week, the Labor Department reported Thursday. That's down from the previous week by 6,000 and lower than the 300,000 estimated by economists surveyed by Dow Jones.

But IBM shares lost more than 8% and were the worst performer in the Dow following a revenue miss in the third quarter. Its top two business segments — global services and the Cloud & Cognitive Software business — fell short of estimates.

However investors looked at IBM as an isolated case. Investors have been monitoring the third-quarter earnings season to assess profit growth as well as signs of cost pressures and supply-chain disruptions for the rest of the year.

Shares of WeWork jumped 11% in their trading debut on Thursday. The office startup went public through a special purpose acquisition company more than two years after its failed IPO.

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