In his Daily Market Notes report to investors, while commenting on Microsoft Corporation (NASDAQ:MSFT)’s earnings, Louis Navellier wrote:
Q4 2021 hedge fund letters, conferences and more
Microsoft to the Rescue
After several tumultuous days and a few disappointing earnings reports, the market was on shaky legs when Microsoft Corporation (NASDAQ:MSFT) reported 4th quarter results after the close yesterday. Initially, the results, although modestly beating estimates, left investors concerned and in extended hours the stock traded down several points and was dragging down many other tech names with them. It looked like we were possibly facing another leg down in equity valuations on Wednesday.
Then, in the Microsoft earnings call with investors, the guidance management gave for 2022 was quite bullish and the stock price did a major turnaround, as did the names which had traded down in sympathy. This morning, Texas Instruments Incorporated (NASDAQ:TXN) reported solid numbers and a strong outlook, confirming the strength Microsoft was seeing and equities have rallied higher across the board with the best day so far for the major indexes in nearly a month. Strong earnings are the key to market recovery and we finally are getting some.
We're going to have Tesla after the close today, and then we're going to have Apple on Thursday. Now, why those three stocks are important is because they were market leaders last year. Literally half of Nasdaq's return came from Microsoft, Tesla Inc (NASDAQ:TSLA), Apple Inc (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOG), and NVIDIA Corporation (NASDAQ:NVDA). We want to see what are going to be the new leaders moving forward. I do expect these flagships to announce good earnings, and hopefully, that will change the tone of the whole market.
And just to remind everybody, the average stock in the S&P is supposed to post 12.1% sales growth right now. They're beating that and they're supposed to post a 20.1% earnings growth. But moving forward, it's going to get a little bit more narrow just to do more difficult year-over-year comparisons.
Later today, we will hear from the Fed, which will update the market on their plans to address inflation. There are some data points such as falling shipping costs and lumber prices which confirm that inflation isn't running away in all sectors, but the Fed is unlikely to make any dramatic changes from their previously announced plans to end quantitative easing in the first quarter and then to begin raising overnight rates. Without new hawkish comments from the Fed, expect the market to continue to react positively to further earnings forecasts of strength in 2022 in the days ahead.
Bargain Shopping
It's time to begin some bargain shopping presented by the recent market pullback. Let the market rebound. I do want to remind everybody that if your positions go up sharply, they might go down the next day. We're going to continue to oscillate, but the key is for the day-to-day volatility to diminish. The key is for the selling pressure to diminish. And from what I can tell, we got a lot more volume on up days and a lot less on down days so that's a good sign of order balances.
I know everybody is shocked by the volatility we've seen this year. It was obviously caused by an irrational fear of what the Fed was going to do and it didn't help that Goldman Sachs and others are predicting more rate hikes than we're going to get. But it's very hard to ruin earnings season and so far, so good. Earnings are working. The other thing I'm watching is analyst revisions. I don't see wholesale negative revisions and the outlook is very good. So, hang in there and enjoy the ride.
Chip Shortage
One other thing I do want to mention is that the semiconductor chip shortage will not be over soon. Chips are going into everything. When I ordered a new computer from Apple, I had to wait quite a while. When you want to order a car you have to wait a good amount of time. The automakers are just trying to make the expensive cars because they have higher margins and that's why the used car prices are up.
Coffee Beans
A massive snapping turtle, which is supposed to be hibernating underwater during this time of the year, was found wandering in a gutter in Baltimore. Why the creature ended up in the gutter remains a mystery. The snapping turtle is now safe from the elements and would be transferred to a wildlife specialist and eventually returned to the wild. Source: UPI. See the full story here.
