Stocks Zip Higher on Robust Retail Sales, Earnings

Most investors will be walking into this weekend with a spring in their step. They can thank booming retail sales and continued earnings momentum, which set up a fine Friday finish for the equity markets.

Headline retail sales unexpectedly grew for the second consecutive month, with September’s figure up 0.7% month-over-month to exceed expectations for a 0.2% decline. And similarly to August, September’s sales were boosted in categories including clothing, groceries, general merchandise, non-store retail and miscellaneous.

“Households also received a boost to incomes from government benefits in mid-August and September, by way of the advance Child Tax credit payments under the American Rescue Plan Act,” says Barclays economist Pooja Sriram. “As we have pointed out previously, retail sales have tended to fare well in the months households received pandemic-relief stimulus.”

Also impressing the pros was Goldman Sachs (GS, +3.8%), which announced 63% profit growth and 26% revenue growth to top Q3 estimates and cap a week of encouraging reports from Wells Fargo (WFC, +6.8%), Bank of America (BAC, +2.9%), Citigroup (C, +2.1%) and others.

“Goldman Sachs is executing at a high level outpacing other large banks and is gaining wallet share in investment banking, trading, and consumer and wealth management,” says CFRA analyst Kenneth Leon, who reiterated his Strong Buy rating on GS stock, and raised his 12-month price target to $260 per share from $245.

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The Dow Jones Industrial Average led the major indexes with a 1.1% surge to 35,294, securing a 1.6% weekly gain. The S&P 500 (+0.8% to 4,471) was up 1.8% for the week, and the Nasdaq Composite (+0.5% to 14,897) climbed 2.2% over the past five days.

Other news in the stock market today:

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• The small-cap Russell 2000 followed the same path as its larger-cap brethren for most of the day, but turned red in the late afternoon, slipping 0.4% to 2,265.

• Johnson & Johnson (JNJ, +0.7%) got a lift today after a Food and Drug Administration (FDA) advisory committee unanimously agreed the federal agency should authorize boosters of the pharma giant’s single-dose COVID-19 vaccine to the roughly 15 million people in the U.S. who received a shot. This follows Thursday’s news that the same panel recommended boosters for Moderna’s (MRNA, -2.3%) COVID-19 vaccine to high-risk individuals and those 65 and older, and is considered a key step in getting regulatory approval for additional doses. Looking ahead, Johnson & Johnson is one of the highlights of next week’s earnings lineup.

• J.B. Hunt Transport Services (JBHT) stock surged 8.7% after the freight operator reported higher-than-expected third-quarter earnings of $1.88 per share – up 59.3% from the year prior – and revenues of $3.1 billion, a 27.2% improvement from Q3 2020. “JBHT delivered on profits in the third quarter and the outlook for 2022 is excellent as capacity return,” says Susquehanna Financial Group analyst Bascome Majors. But he maintained a Neutral (Hold) rating on the stock. “We just can’t get there on valuation, with JBHT trading near long-term averages versus other more cyclical trucking and logistics-related businesses deeply below,” he wrote in a note.

• U.S. crude futures jumped 1.2% to settle at $82.28 per barrel.

• Gold futures fell 1.7% to finish at $1,768.30 an ounce.

• The CBOE Volatility Index (VIX) finished off 3.4% to 16.29.

• As discussed today in our free A Step Ahead newsletter, the SEC is reportedly nearing its first approval of a futures-based Bitcoin ETF. That seemed to light a fire under Bitcoin, which shot 6.2% higher to $61,436.15. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)

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Will the American Consumer Power U.S. Markets?

The latest retail-sales beat might be more than just a short-term boon for the stock market.

“The U.S. economy is 70% reliant on the consumer, and the doom-and-gloom forecasters who believed stagnant economic growth (especially in terms of the stagflation narrative) was ahead for the U.S. … are going to be surprised at the resilience of the U.S. economy, and we see higher equity prices ahead for this year and next year,” says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

“We believe that being long equities is the best course of action, and that cyclical stocks such as financials, industrials, energy and materials are positioned for further gains,” he adds.

Of course, if you believe more market buoyancy is ahead, you can tap into that potential in more ways than just sector plays. You could consider values such as these cheap 13 Dividend Aristocrats or these five overly punished equities. You can also take the advice of the jet-set, following billionaires into their highest-conviction picks.

However, if you want to get yourself as close to the source as possible, check to see whether corporate insiders are eating their own cooking. The following are seven stocks that have seen noteworthy buying from at least one corporate insider of late – often a bullish signal that demonstrates high confidence that the company’s fortunes are about to improve.

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