Stocks Headed for Weekly Wins Despite Monday's Rout

The Dow suffered its worst daily drop since October 2020 on Monday

Deputy Editor
Jul 23, 2021 at 2:08 PM
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It was a jarring start to the week for Wall Street, with stocks in a seeming freefall as a rise in global Covid-19 cases, specifically the delta variant, had many wondering if the smooth economic recovery expected might be too good to be true. Investors quickly cycled out of reopening stocks, sending the Dow Jones Industrial Average (DJI) down 946 points at its session lows, eventually notching its worst one-day selloff since October 2020. While the S&P 500 index (SPX) and Nasdaq Composite (IXIC) didn't fare much better, by Tuesday, things seemed to be turning around, and all three indexes were able to find their footing, as they slowly began to chip away at Monday's trough. The 10-year Treasury yield was also in focus as it began to recover from five-month lows. 

A round of strong earnings reports helped prop up the market on Wednesday, pushing the Dow to completely erase the week's losses. Stocks kept climbing on Thursday, albeit at a much slower rate. Though another batch of well received earnings reports permeated the market, a higher-than-expected jobless claims reading for last week wound up casting a long shadow over Wall Street. Nevertheless, all three indexes are now headed for their fourth-consecutive daily wins, as well as sizeable weekly gains. 

Blue-Chip Earnings in the Spotlight This Week

It was a strong earnings turnout from several members of the Dow that helped inject some optimism into markets. IBM (IBM) kicked off the week with a profit and revenue beat that brought in some bull notes. Not every report was well-received though. Johnson & Johnson (JNJ) also reported earnings early in the week, and though the company posted upbeat results, it saw a muted post-earnings response, as the company's full-year forecast paled in comparison to some of its rivals, including Pfizer (PFE) and Moderna (MRNA).

Coca-Cola's (KO) earnings reaction was a bit more positive, and an earnings and revenue beat sent the beverage stock to fresh highs. Meanwhile, American Express (AXP) cooled off ahead of its turn in the earnings confessional, but also managed to hit fresh highs after the event. Looking ahead, there will be plenty more blue-chip earnings for investors to digest next week, including McDonald's (MCD), which will post results on Wednesday, July 28. 

Analysts' Picks Heading Into August

The brokerage bunch was busy this week, chiming in on a bevy of earnings, and weighing the perceived risks of another spike in Covid-19 cases on the economy. Skechers (SKX), Snap (SNAP), and Chipotle (CMG) all scored a plethora of post-earnings upgrades and/or price target hikes. Shopify (SHOP) was also noticed by analysts, pushing it to a record high earlier in the week. Meanwhile, one stock that looks ready ready to join these names is Electronic Arts (EA), which boasts a promising technical setup for bulls at the moment. 

Big Tech In Focus as Earnings Season Charges Forward

Tech will be in focus next week, with several FAANG names in the earnings spotlight including Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), and Facebook (FB). Sector members Tesla (TSLA) and Spotify (SPOT). A few blue-chip names will make their presence known as well, including 3M (MMM), Boeing (BA), Caterpillar (CAT), Exxon Mobil (XOM), and Visa (V). The latest Federal Open Market Committee (FOMC) announcement will also be due out next week, with comments from Federal Reserve Chairman Jerome Powell, to follow. 

In the meantime, check out our latest Monday Morning Outlook, in which Senior Market Strategist Matthew Timpane reveals why a perfect cocktail of volatility could be brewing, and what that might mean for trends in equities. Plus, Rocky White explains why a recent market breadth indicator could hint at a prime buying opportunity. 

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