Day Traders Diary

11/16/21

The major averages finished in the green, but off the highs following strong October retail sales report and better-than-expected third-quarter results from Home Depot and Walmart signaled the U.S. consumer is still ramping up spending even in the face of rising prices. The Dow Jones Industrial average added 57 points, or 0.15%, to 36,144. The S&P 500 gained 18 points or 0.39% to 4,701 while the Nasdaq Composite rose 120 points or 0.76% to 15,973.

 The major averages have been stuck in a rut in recent days after touching records last week. The Dow sits 1.4% away from its record while the S&P and Nasdaq are within 1% of theirs.

The latest retail sales figures for October showed consumers were increasing their spending, with sales jumping 1.7%. That compares to a 0.8% increase in the prior month. The report showed broad strength in a number of categories from autos to sporting goods. Online sales were up 10.2% from a year ago. The gains came even as consumer prices surged 6.2% year-over-year last month, inflation not seen since the 1990s.

Home Depot was the biggest gainer in the Dow by far on Tuesday, jumping 5.7% after results topped estimates and net sales jumped 9.8% last quarter. The home improvement retailer also said fiscal fourth-quarter sales were already tracking higher than last quarter, pointing to a possible strong year-end finish.

In another sign of consumer strength, Walmart reported third-quarter profit and revenue well above estimates, and U.S. same-store sales jumped 9.2%, excluding fuel. However, digital sales saw growth of just 8%, compared to Street expectations of 20.5%. The stock pulled back 2.5% and was the Dow's biggest decliner.

On some level, investors expected strong retail earnings, Sam Stovall, chief investment strategist at CFRA Research, told CNBC.

Shares of retail giant Lowe's also rose 4.2% while Target shares got a 1.1% lift. Both companies are scheduled to report quarterly results Wednesday before the bell.

Goldman Sachs said earnings beats can and should continue through at least 2022. It issued a bullish outlook on the market Tuesday, with strategist David Kostin saying he expects continued earnings growth to drive the S&P 500 to 5,100 at the end of 2022, a return of roughly 9% from here.

Tesla shares rose 3%, recovering all of its losses from Monday, after CEO Elon Musk sold nearly $7 billion worth of Tesla stock last week. Still, the electric vehicle maker fell 15.4% that week, its worst since March 2020.

Meanwhile, EV start-up Lucid's shares soared almost 20% after executives told investors that reservations for its first vehicles are up and 2022 production plans are still on track. That pushed its market value to more than $88 billion, past that of Ford. Its $73 billion market cap is approaching Ford's $79.4 billion market cap, but is still far below Tesla's, which hit $1 trillion this year.

On Monday, the Dow dipped about 13 points, or 0.04%, for its fourth negative session in the last five. The S&P 500 finished the day unchanged at 4,682.87 and the Nasdaq Composite dipped 0.04%. The Russell 2000 was the relative underperformer, declining 0.45%.