Stock Market Today: Dow 36,000 at Last!
The Dow closed above the 36,000 level for the first time ever Tuesday, while earnings also pushed the S&P 500 and Nasdaq to new heights.
The Dow Jones Industrial Average cleared the 36,000 level on a closing basis, and the major indexes extended their rally into record highs yet again Tuesday, as investors digested another round of encouraging earnings reports and prepared for tomorrow's much-anticipated Federal Reserve meeting.
Among the splashier earnings reports was Avis Budget Group (CAR), whose stock more than tripled intraday and finished up 108.3% after announcing a wide third-quarter profit beat ($10.74 vs. $7.24 expected) and after management made general overtures toward boosting its electric-vehicle fleet.
The good news very likely triggered a short squeeze in Avis; the car-rental name had a high 21% of its shares sold short as of the most recent data, meaning that 21% of shares available for trading were being used to bet against CAR going higher.
Also, Avis’s move was large enough to trigger a confirmation move concerning Dow Theory, which predicts when the market is in a broader trend higher.
"Speaking of Dow Theory, there was actually confirmation by the Dow Jones Transports today, which traded to a new all-time high for the first time since May,” says Michael Reinking, senior market strategist for the New York Stock Exchange. “This happened in somewhat of an ominous fashion, as the index rallied over 12% intraday as Avis became the most recent meme target. With the stock still up 100% on the day, the index is up ~6%. [The Dow Jones Transportation Index finished up 6.9%] … The Reddit era is clearly pushing the boundaries of technical analysis."
Pfizer (PFE, +4.2%) climbed higher as COVID-19 vaccine sales lifted revenues and earnings by 134% and 133% year-over-year, respectively. And Under Armour (UAA, +16.5%) rocketed ahead after besting top- and bottom-line estimates and raising its full-year outlook.
The Dow (+0.4% to 36,052), interestingly enough, was helped most by non-earnings moves in Cisco Systems (CSCO, +2.7%) and Amgen (AMGN, +2.1%), and eclipsed the 36,000 mark on a closing basis for the first time. That puts the final touches on a prediction made (in)famous by the book Dow 36,000, co-authored by Kiplinger's columnist James Glassman – a missed call from which Glassman says he has learned many lessons.
Joining the Dow at all-time highs were the S&P 500 (+0.4% to 4,630) and the Nasdaq (+0.3% to 15,649). And the small-cap Russell 2000, which managed a mere 0.2% gain to 2,361, nonetheless managed to finally outdo its previous high of 2,360, which was set back on March 15.
Other news in the stock market today:
- U.S. crude futures slipped 0.2% to finish at $83.91 per barrel.
- Gold futures shed 0.4% to settle at $1,789.40 an ounce.
- The CBOE Volatility Index (VIX) declined 2.5% to 16.00.
- Bitcoin climbed 3.6% to $63,619.82. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
- Chegg (CHGG) plunged 48.8% today after the education technology company warned of an industry "slowdown" in last night's earnings report. While CHGG said third-quarter revenue grew 12% year-over-year to $171.9 million and earnings per share (EPS) arrived at 5 cents compared to a year-ago loss of 29 cents per share, the company forecast fourth-quarter revenue to range between $194 million and $196 million – well below the $205.7 million in revenue it reported in Q4 2020. Chegg is also anticipating adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $67 million to $69 million, below the $87.9 million it earned the year prior. CHGG stock received several downgrades as a result, including one from Raymond James analysts – to Market Perform (Hold) from Outperform (Buy). "We don't see a catalyst for improved growth over the next few quarters," they wrote in a note. "This should make shares range-bound, and more deserving of a Market Perform rating."
- DuPont (DD) was a big earnings winner, surging 8.8% in the wake of its results. For the third quarter, the chemicals company reported adjusted earnings of $1.15 per share on $4.3 billion in revenue – both figures above what analysts were expecting. The company also lowered its full-year net sales and adjusted EPS outlooks due to rising raw material costs and a slowdown in orders linked to the global semiconductor shortage. Additionally, DD said it is buying electronics material maker Rogers (ROG, +29.6%) for $5.2 billion to help boost its presence in the electric vehicle (EV) and 5G infrastructure markets and that it is selling a large portion of its Mobility and Materials business. "The transactions enable DD to expand its position in high-growth markets while reducing earnings cyclicality, in our view," says CFRA Research analyst Richard Wolfe, who reiterated his Strong Buy on the stock.
What to Expect From the Fed
Next up: the Fed's statement from its Nov. 2-3 Federal Open Market Committee meeting, due out tomorrow afternoon.
Wall Street's expectations are largely straightforward and uniform, with most expecting the Fed to announce that it will begin to taper asset purchases – and that stocks have largely priced that in.
"The Federal Reserve's tapering could begin by year end and we'll likely hear more commentary during Wednesday's meeting," says Greg Marcus, managing director of UBS Private Wealth Management. "But we don't expect any tapering actions to disrupt the stock market's rally. The Federal Reserve has been signaling its tapering plans for some time."
Invesco Chief Global Market Strategist Kristina Hooper largely concurs, adding that the central bank will likely maintain its messaging on rate hikes, too.
"I expect [the Fed] to continue saying what it's been saying: Rate hikes have been decoupled from tapering, so we shouldn't expect rate hikes to begin until the back half of 2022," she says.
Should the expected come to pass, investors might feel emboldened to continue chasing what's been working – transportation stocks, for instance, which also sit at all-time highs, or energy stocks that have built up a head of steam.
Conversely, investors might want to take the road much, much less traveled. The stock market is vast, spanning thousands of stocks that rarely if ever see the light of analyst or media coverage – and among that group are a number of quality equities just chugging along without any fanfare. Today, we've put a spotlight on a dozen of these under-the-radar plays.