Day Traders Diary

10/17/22

The major averages rose sharply on Monday as key earnings report eased some fears from investors and oversold tech names enjoyed a rebound rally. The Dow Jones Industrial Average gained 550 points, or 1.86%, to close at 30,185. The S&P 500 jumped 2.65% to 3,677. The tech heavy Nasdaq Composite surged 3.43% for its best day since July, finishing at 10,675.

The move comes as stocks are near the lows of the year, and the S&P 500 has declined in four of the past five weeks. Big moves in both directions in recent weeks have fed a sense of uneasiness on Wall Street, though some believe the market is due for a rebound.

The Nasdaq's strong day was helped by some speculative tech names, with Zoom Video gaining 6% and Chinese internet stocks outperforming.

Meanwhile, the third-quarter earnings season is in full swing. Investors are monitoring if corporate America will have any significant downward revisions to their outlooks in the face of stubbornly high inflation and the economic slowdown.

Bank of America  on Monday reported better-than-expected results, sending the stock up 6%. Bank of New York Mellon also posted results that beat analyst expectations and its shares jumped 5%.

Many notable technology names are also reporting this week, including Netflix, Tesla and IBM.

Another factor in Monday's moves were political developments in Europe, where new UK finance minister Jeremy Hunt announced that almost all planned tax cuts would be scrapped. The pound traded more than 1% higher at almost $1.135 per U.S. dollar, and U.K. government debt rallied sharply.

Stocks close higher, with Nasdaq jumping more than 3% Stocks finished the day up solidly higher, with the Nasdaq Composite leading the way with a gain of more than 3%. The Dow added more than 500 points to close back above the 30,000 level.

These stocks typically exceed expectations and rally on earnings day. A number of companies have a track record of beating earnings estimates at least 75% of the time and rallying 1% or more the day they report, a CNBC Pro analysis of data from Bespoke Investment Group found.

Intuitive Surgical has the highest one-day average change on earnings day, according to Bespoke. The medical device company, which releases earnings Tuesday, beats estimates 88% of the time and has a 2.5% average one-day stock change.

Tractor Supply, which announces its third-quarter earnings Friday, has the lowest beat rate on the list, topping estimates 75% of the time. It has rallied an average 1.4% on earnings days.

U.S. Treasury yields have rebounded from their lows of the session. The 2-year Treasury yield is now down about 5 basis points to 4.45%, while the 10-year yield is unchanged just above 4%. Yields move opposite of price, and a basis point is equal to 0.01 percentage points.

Notably, the rebound for yields has not caused a major move in the equity markets, where the Nasdaq is still up more than 3% for the session.

Stocks' rebound rally could climb to as much as 11%, says Morgan Stanley's Wilson

The stock market's historic turnaround last week following a hotter-than-expected inflation report was the beginning of a tradeable short-term rally, according to Morgan Stanley.

The S&P 500 closed lower on Friday at 3,583.07, after notching a 2.6% gain the day before following the CPI report. However, stocks were back up on Monday and Michael Wilson, the firm's chief U.S. equity strategist who called the bear market, said the "inflation bull trap" can push the broad market index as much as about 11% above Friday's close.

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