Is The Market Too Hot Right Now?

This week we’ve seen markets hit all time highs on numerous occasions, which raises the question, “Is the market too hot right now?

The term “melt-up” has also been thrown around in small circles and suggests that some think that the current market conditions are similar to what was seen back in January with the big momentum surge to start the year. So what should we really be taking away from all of this for the average investor?

Pay Attention To The Facts

A big proponent to the recent market expansion has a lot to do with the recent earnings season. Continual revenue beats from some of the more “luxury focused” companies like Tiffany’s (TIF) and today’s beat from Signet Jewelers (SIG) is a sign that the economy is feeling “good” right now. Furthermore, the lack of added interest rate hikes have continued to help the market.

 

You also have new luxury brands aiming to go public as well. Aston Martin, the British automaker best known for being James Bond’s car brand of choice, said on Wednesday that it planned to go public.

“Aston Martin Lagonda has been transformed into a luxury business focused on creating the world’s most beautiful high-performance cars,” Andy Palmer, Aston Martin’s chief executive, said in a statement.

Aston Martin will join the ranks of other luxury brands like Ferrari (RACE) and the makers of Maserati and Alfa Romeo, Fiat Chrysler (FCAU).

Looking Ahead

Many investors are looking at industries that are more progressive right now. Tech and, believe it or not cannabis are delivering solid gains right now. Canadian LP Tilray (TLRY) reported its first ever earnings as a public company this week and blew away most expectations.

Constellation Brands (STZ) upped its stake in Canopy Growth (CGC), another Canadian producer and it’ been said that alcohol juggernaut Diageo (DEO) will throw its hat in the ring with at least one Canadian cannabis company. Cronos Group (CRON), Zynerba (ZYNE) and Insys (INSY) are in the spotlight as the cannabis stock rally could be set to continue into September.

For tech, Apple Inc. (AAPL) continues to stretch its lead in the “trillion dollar market cap club” while Amazon (AMZN) may be close behind after surpassing the $2,000 per share mark in pre market trading on Thursday. Morgan Stanley (MS) raised its target price citing a $1.2 Trillion value for the company and sparked even more interest from investors. Other big tech companies like Microsoft (MSFT) and Cisco Systems (CSCO) were among the other big movers with gains north of 1% each.

Commenting on the markets’ August strength, JJ Kinahan, chief strategist at TD Ameritrade, told FOX Business that,“The market continues to do well with strong earnings boosting us to new highs, what’s surprising is that we’re doing so without the FANG stocks leading.  It’s impressive that we continue to see buying strength under any circumstance and hit new highs.”

And on the earnings side things will continue to be retail-heavy, with notable companies reporting Thursday expected to include Kroger (KR), Dollar General (DG), Dollar Tree (DLTR), and Ulta Beauty (ULTA) from the S&P 500. Other retailers reporting results are scheduled to include Abercrombie & Fitch (ANF), Sears (SHLD), and Perry Ellis (PERY).

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Earnings Season Continues To Surprise; New Market Trend Starting?

Strong Earnings: Some Stocks Shaky

Once again we are seeing another Friday of earnings reports.  Among some of the most active stocks reporting earnings, Foot Locker (FL), Buckle (BKE), Gap Stores (GPS), and Hibbett Sports (HIBB) are catching investor attention; some for not so good reasons.

The Good, The Bad, The Ugly

Just like we talked about yesterday, this earnings season has been interesting to say the least.  Companies are crushing earnings left and right and for many, last year’s same period figures have been dwarfed. But it hasn’t been all fun and games as many investors have seen.

  • Typically when a company beats earnings, you would assume prices would increase.
  • Typically when a company beats on things like revenue and EPS, you would assume prices would increase.
  • Typically when a company sees increases in things like same store sales year over year, you would assume prices would increase.

In previous quarters, that has been the case but today’s spoiled investor is now getting down to the nitty gritty as higher than usual earnings expectations have left the market open to big pitfalls.  Today, for instance FootLocker beat on all fronts except same store comps.  Even though this number was up, it didn’t quite hit the higher expectations of the street.  The company beat on all other fronts but due to this one key factor not meeting or exceeding the street, Foot Locker has suffered a strong pullback during pre market hours.

Foot Locker Mixed

Estimates for Foot Locker had earnings per share expected to jump 13% to 70 cents. Revenue was seen rising 4% to $1.763 billion. Same-store sales are expected to rise 0.7% overall, with store comps up 0.9% and direct-to-consumer comps up 6.5%, according to Consensus Metrix.

Results showed Foot Locker earned 75 cents a share. Revenue climbed nearly 5% to $1.78 billion. Same-store sales edged up 0.5%.

However, the outlook for Foot Locker showed the company aiming at stronger same-store sales later in the year.

Read More: Key Trading Strategy To Play Earnings 

Companies are no longer in a simple revenue beat mode.  Now the focus needs to be on streamlining operations and continuing to hit on all cylinders during this huge economic expansion period. This has brought a bit of unease for some as they think this could signal shaky ground for future quarters.  Needless to say, other companies mentioned: Gap Stores and Hibbett both got slammed on earnings misses.

The shining star today: Buckle (BKE)

Shares of the accessories company ran during pre market hours after strong earnings. Estimates had analysts expecting Buckle earnings to jump 29% to 31 cents. Revenue was seen ticking up 3% to $201 million. Results also showed that Buckle earnings came in at 32 cents, with sales up nearly 3% to $201.1 million. Same-store sales rose 1.4%.

The Best Retail Earning Quarter In Eight Years Continues To Unfold

– Ken Perkins, Retail Metrics President

Retail Metrics President Ken Perkins said this week Tuesday that “the best retail earnings quarter in eight years continues to unfold.” Buckle, which has more than 450 stores across the country, offers both brand names and private-label apparel.

According to analytics from Zack’s, the sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

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