Market Update:
What a difference a few hours can make on Wall Street. Dow futures plunged ~900 points early Wed morning (the sell off began late Tuesday night when the polls started closing) and then almost immediately buyers showed up. Wednesday was the single largest intra-day reversal we have seen on Wall Street since 2008! Cooler heads prevailed and all political opinions/noise aside, Trump’s economic policies are intended to be pro-growth and that is good for the economy and Wall Street. Trump understand’s numbers and manged to turn himself into a billionaire. One would hope he will help the country thrive. He’s the first billionaire to be President and I’m optimistic about our future. I hope he does a fantastic job.
A Look Under The Market’s Hood:
Interestingly, the bifurcated market we spoke about over the summer and into the election has switched almost completely. Before the election, growth stocks were leading alongside the Nasdaq/Nasdaq 100. Post election, they are lagging and lagging badly (AAPL, FLT, AMZN, FB, BABA, just to name few) and the areas that were underperforming are now outperforming. The market was pricing in a Hillary presidency and now quickly readjusted itself to our new reality.
Constructive Action
In the short term, markets are clearly extended and we don’t want to chase anything up here. We have to say the market had every chance in the world (and then some) to fall and it didn’t. When a market can’t fall- that means it’s most likely going higher. I hope this very long chop-fest is over and we get a nice clean trend in the near future. If/when that does happen, we will begin getting much “longer” but for now we want to see where the market closes tomorrow and will have a full report for you this weekend.
FLS Portfolio:
Here’s a snapshot of the FLS portfolio as of this writing (2:19pm EST),
- The service owns:SMH +14.25%,
B. The service will exit: SMH @ 65.96,
Working Orders:
There are no working orders today
A Closer Look At Earnings Season
So far, most stocks are down after reporting earnings. That can quickly change. Here are the stats, so far, from earnings season:
451 (90.2%) companies in the S&P have reported Q3 equivalent earnings
21 (4.2) companies in the S&P will report earnings next week
Q3 Earnings Summary:
72.7% have POSITIVE EPS surprise
6.2% have NEUTRAL EPS surprise
21.1% have NEGATIVE EPS surprise
70.7% have HIGHER EPS year over year
3.1% have NEUTRAL EPS year over year
26.2% have LOWER EPS year over year
Q3 Sector Performance (percentage of Positive Surprise):
Information Tech: 89.1%
Financials: 84.4%
Consumer Staples: 79.3%
Utilities: 78.6%
Energy: 72.2%
Industrials: 68.8%
Healthcare: 68.5%
Consumer Discretionary: 67.2%
Real Estate: 53.6%
Materials: 51.8%
Telecom Svcs: 40.0%
Earnings growth for the SPX the third quarter is 2.7% vs expectations of 2.6%
Ø Worth Noting: Earnings growth for the 387 non-financials that reported is 0.8%
Revenue growth for the SPX the third quarter is 2.3% vs expectations of 2.52%
Disclaimer:
This analysis contains information from resources believed to be reliable but are not guaranteed as to accuracy or wholeness as of the date of this publication. Past performance is not necessarily indicative of future results. There is always a risk of loss in trading and investing. Opinions articulated are subject to change without notice. This analysis and any opinions expressed are intended for educational purposes only and should NOT BE interpreted as a call for engagement in any transaction involving the purchase or sale of any security or investment product or service. The risk of loss in investing and or trading can be substantial, and traders/investors should carefully consider the inherent risks of such an investment in light of their financial condition. The author, firm, associates, or the firm’s clients may have a position in any of the investments mentioned and their positions are subject to change without notice. Any reproduction or retransmission of any portion of this report without the express written consent of Sarhan Capital is strictly prohibited.
