Day Traders Diary

7/20/22

The major averages rose on Wednesday, fueled by a rally in tech stocks, as all major averages reached their highest point since early June. The Nasdaq Composite jumped 1.58% to 11,897, and the S&P 500 advanced 0.59% to 3,959.90. Meanwhile, the Dow Jones Industrial Average was up 47 points, or 0.15%, to 31,874.84 — lagging the other two benchmarks and alternating between gains and losses during the session.

All three major averages hit their highest level since early June.

Those moves follow Tuesday's rally as investors, betting that markets may have finally found a bottom, shifted into more risky assets such as tech stocks.

Semiconductor stocks outperformed after the Senate pushed forward a $50 billion bill to bolster chip manufacturing in the U.S. Shares of Advanced Micro Devices jumped 4.1%, Nvidia was up 4.8%, and Qualcomm advanced 2.9%.

Streaming stocks surged on the back of better-than-expected earnings from Netflix, which said it lost 970,000 subscribers in the second quarter, less than the 2 million it had previously projected. The streaming giant's earnings per share also came in above analyst expectations.

Shares of Netflix jumped 7.4%. Disney advanced 3.8%, Paramount climbed nearly 3.8%, and Roku surged 6.9%.

Meanwhile, Bitcoin breached the $24,000 threshold for the first time in more than a month.

Some investors have been encouraged by the recent trading action, believing it is signaling that the bear market has bottomed. NYSE stocks achieved a widely followed "90% up day" on Tuesday with more than 90% of stocks listed on the exchange advancing and accounting for more than 90% of the volume.

Investors pointed to a Bank of America survey that suggested deteriorating sentiment could potentially set up a buying opportunity in the market. Meanwhile, the U.S. dollar, which recently surged to a 20-year high against the euro, softened.

Still, other market participants were skeptical of the bounce, as they await more earnings and search for more clues into the state of the U.S. economy.

On the economic front, a report from the Mortgage Bankers Association pointed to more pain for U.S. consumers as they deal with higher prices and interest rates. Mortgage demand declined more than 6% last week compared with the prior week, dropping to its lowest level in 22 years.

At the same time, existing home sales in June fell 5.4% from May, according to the National Association of Realtors.

About 12% of S&P 500 companies have reported earnings so far this quarter. Of those companies, 68% have beaten analyst expectations, according to FactSet. Investors had been awaiting this earnings season for clues on how companies are coping with the worst in 40 years.

Baker Hughes dropped 8.3% after disappointing second quarter earnings. The oilfield services company reported earnings of 11 cents per share, which is half what analysts were expecting, according to Refinitiv.

Biogen declined more than 5.8% despite posting a beat in its latest quarterly report. The company warned that its revenue could take a hit from growing generic competition.

The Dow rallied more than 700 points during Tuesday's session, with the S&P 500 and Nasdaq soaring 2.8% and 3.1%, respectively. The three benchmarks also closed above their respective 50-day moving averages for the first time since April.