The Dow and S&P are down. The Nasdaq Composite is trading flat.
Many top-flite stocks have plunged from their recent highs over the last few days as well.
Normally, this is the kind of thing that precedes a bearish wave of pessimism.
But make no mistake:
Buying opportunities spring eternal in today’s “see-saw” market. And in high-quality, easily recognizable names to boot.
General Motors (NYSE: GM) got the party started this morning when it missed Q2 earnings, reporting an EPS of just $1.97 vs. $2.23 expected. Revenue beat analyst estimates ($34.17 billion reported vs. $30.9 billion expected) despite $1.3 billion in warranty retail costs.
GM shares dropped 7% in response.
In terms of forward guidance, the automaker upgraded its full-year guidance to $11.5 billion – $13.5 billion, which was far greater than its prior $10 billion – $11 billion projection. Still, that wasn’t enough to keep shareholders from dumping GM at the open.
The ADP private payroll survey dinged sentiment this morning, too, when it showed a 330,000 job gain for July vs. the consensus estimate of 653,000. It’s a huge miss to be sure of it, but until the Labor Department confirms the official numbers via its July jobs report (due out Friday), investors won’t truly panic.
“Right now, I think that the market is moving forward a little cautiously with the triple-peak theory — the potential peak in earnings, peak in economic growth and the potential peak in stimulus looming, both fiscally and from a monetary perspective,” explained Chris Osmond, chief investment officer at Prime Capital Investment Advisors.
“While earnings and growth may be peaking, it doesn’t mean that they’re going to go negative, just decelerate.”
Covid delta variant cases seem to be keeping a lid on equities as well, especially as new infections accelerate in the US among the fully vaccinated.
“The elephant in the room is the delta variant. It has not prompted major changes in public health restrictions yet, but it could make some people nervous about going back to work, especially in those states in which vaccine hesitancy has held back progress,” warned James McCann, deputy chief economist at Aberdeen Standard Investments.
“However, it is probably too soon to see the delta variant really impinging on the data. It is likely to be drowned out by a broader hiring spree at this stage.”
That “hiring spree” may never come if the current government unemployment programs remain so robust.
Nevertheless, Wall Street and scores of retail traders manage to find the silver lining. And that bullish enthusiasm could very well leak into oversold stocks in the midst of otherwise healthy long-term uptrends.
Starbucks (NYSE: SBUX), for example, is down over 6% from its recent peak despite recently reporting fantastic earnings. Visa Inc. (NYSE: V), meanwhile, didn’t exceed analyst estimates but finds itself in a similar predicament. The stock has risen almost non-stop for months.
Today, it’s down roughly 6% from last week’s peak and a new all-time high.
So, as has been the case for the entirety of this year, dip buying should continue to be rewarded handsomely. Certain stocks look simply bulletproof in a post-Covid market and nearly every quick drop is met with an even faster recovery.
That means “bargain hunting” for stocks close to (but still beneath) their record highs could easily drum up overachieving buys.
Regardless of how many new delta variant infections are thrown in the market’s face with each passing day and independent of any inflation scares that arise in the coming months.
