Day Traders Diary

8/18/22

The S&P 500 and Nasdaq Composite rose on Thursday as traders fought to resurrect the recent market rally that simmered earlier this week.

The S&P 500 and Nasdaq Composite rose 0.4% each, while the Dow was last up 60 points, or 0.18%

Retail earnings continued Thursday with reports from Kohl's, Bath & Body Works and BJ's Wholesale. The results offered insight into the health of the consumer. Kohl's shares slid after the company cut its guidance while BJ's Wholesale jumped after topping estimates.

More data released Thursday provided clues into the state of both the jobs and housing markets. Initial jobless claims fell to 250,000 for the week ended Aug. 13, while existing home sales dropped nearly 6% in July.

Thursday's moves came after the Dow on Wednesday fell roughly 172 points — snapping a five-day winning streak — as traders parsed through the minutes from the Federal Reserve's July meeting. The central bank said it remains committed to fighting inflation, but indicated it could adjust its pace of tightening based on market conditions. Investors had hoped the Fed might slow the pace of its rate hikes after July's better-than-expected consumer price index.

"The thing in the driver's seat is the Fed and what's propelling them — the gas in the Fed's tank — is inflation," said Cliff Corso, chief investment officer at Advisors Asset Management. "I think the market is going to bounce a little bit back and forth probably for the foreseeable future, right now with a positive trend, because the market is still embedding within it the hope that the Fed is wrestling down inflation."

Earnings struggled to impress markets this season, Bernstein says

At least 90% of S&P 500 companies have reported earnings so far this season, but an analysis from Bernstein suggests many names have struggled to dazzle the markets.

"Companies missing expectations on both the top and bottom lines sold off by 380 bps on the print this quarter, while double beats were up by only 70 bps on average," wrote analyst Ann Larson in a note to clients Wednesday. "Beating on either earnings or sales, but not both, sent stocks down by 2-3 percentage points on average post report."

Of the companies that have reported earnings, 82% beat or met estimates from analysts, with real estate, industrials and energy leading the group, she noted.

That said, the earnings and sales beat ratios for the quarter have dropped below the average over the last two years, although they remain above the averages since 2008, Larson wrote.

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