EB Daily Market Report - Wednesday, February 3, 2021

Tom Bowley - February 03, 2021

Executive Market Summary

Futures were mixed with early strength from NASDAQ shares
Alphabet (GOOGL) and Amazon.com (AMZN) reported quarterly results that exceeded expectations
The S&P 500 has rallied to move within 13 points of its all-time closing high of 3855
The NASDAQ 100 printed an intraday high of 13,561, just two points shy of its all-time intraday high
Today's strength is all about energy (XLE, +4.17%) and internet ($DJUSNS, +4.59%)
Financials are showing some strength with the 10-year treasury yield ($TNX) up another 3 basis points to 1.13%
Consumer discretionary (XLY), meanwhile, is taking a breather after AMZN dipped following its early-morning strength

Market Outlook

Well, the U.S. stock market received very good earnings news from two behemoths - Alphabet (GOOGL, +9.26%) and Amazon.com (AMZN, -0.70%). Both companies traded higher at the opening bell, but have headed in opposite directions since. AMZN has moved into negative territory and, with that reversal, may have dashed the NASDAQ 100's ($NDX) hopes of breaking to a new all-time closing high:

It's hard to say the NASDAQ's next move, but if we finish with a black-filled candle right at price resistance, we need to at least be open to the possibility that we remain in consolidation mode.

Sector/Industry Focus

The Dow Jones U.S. Internet Index ($DJUSNS) is looking to close above 3000 for the first time in its history. At a minimum, it's breaking out on an absolute basis, and quite possibly, on a relative basis as well:

Alphabet (GOOGL) is clearly the leader in the space today, but we have two more big earnings reports that will be delivered tomorrow in this space - Snap, Inc. (SNAP) and Pinterest, Inc. (PINS). Both are getting a lift from GOOGL today and could add to the bullish tone of internet stocks tomorrow.

ChartLists/Strategies

I provided 3 stocks in yesterday's DMR that I felt could be setting up for nice reports, but the risk of holding may be reduced given their recent pullbacks and consolidation. The first of those, Capri Holdings (CPRI), a clothing & accessories ($DJUSCF) company, posted EPS this morning of $1.65. The consensus estimate was $1.04, a 60% beat. It did, however, miss revenue estimates slightly. CPRI gapped higher this morning, but was unable to break out. I'd generally sell on this type of reaction. First, let's look at the chart:

There are two things I don't like about CPRI now. First, they missed their revenue estimate. They will automatically disqualify the company from finding its way onto our Strong Earnings ChartList (SECL). Second, they gapped up, but failed to make the breakout above the early-January high. I'm not sure where CPRI moves from here, but I'd look elsewhere for companies that show the ability to beat both its revenue and EPS targets.

Earnings Reports

Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.

Wednesday, February 3:

QCOM, ABBV, NVO, SNE, GSK, SPOT, BSX, HUM, EPD, KLAC, MET, BIIB, ALGN, CTSH, EBAY, APTV, ALL, AFL, CTVA, SU, YUMC, AVB, QRVO, GWW, CHKP, IAC, CNHI, AVTR, NMR, MAA, BIP, IEX, AVY, SMG, DT, APO, HWM, UHAL, LNC, LAD, GRUB, ANGI, CPRI, LFUS, SLAB, APPS, INGR, ENSG, INOV, FORM, HI, VNE, LGND, MIME, KLIC, MTOR, NTGR, ELF, QNST, ADTN, AMSC

Thursday, February 4:

MRK, TMUS, RDS/A, BMY, PM, SNAP, GILD, CI, BDX, ATVI, ABB, ICE, APD, PINS, F, PTON, U, BAX, BCE, MCHP, PH, CMI, ALXN, PRU, YUM, HSY, MSI, BLL, MTD, WEC, CLX, AME, FTNT, ODFL, FTV, ABC, FLT, IP, DGX, XYL, HIG, ZEN, MPWR, CMS, PENN, ESS, TW, NLOK, OTEX, MPW, CG, NWSA, WYNN, BILL, PCTY, CPT, SNA, NBIX, LEA, TPR, TWST, DECK, CSL, PFPT, RL, DXC, WMS, COLM, SKX, UNM, NEWR, PFSI, GOOS, SYNA, TDC, ARNC, WERN, GPI, MYGN, HIMX, KN, SBH, GPRO

Economic Reports

January ADP employment report: 174,000 (actual) vs. 50,000 (estimate)

January PMI composite: 58.7 (actual) vs. 58.0 (estimate)

January ISM services: 58.7 (actual) vs. 56.8 (estimate)

Happy trading!

Tom