(Too) Calm Before the Q3 Earnings Storm?🌦️ | Weekly Market Sentiment Review 10/11-10/15

Stock market news sentiment is remarkably neutral this week as we kick-off a full spread of Q3 earnings reports. In this edition, we dive into news sentiment for $QQQ, $NVDA, $INTC, $WFC, and $MSFT!

Gooooood morning, and welcome to another weekly review of stock market news sentiment. I am your host Ramsey Shaffer (@ramsey_stocks on Twitter), thank you for being here. As always, the best way to support this newsletter is by showing some love with a like, comment, or sharing with a friend. If you enjoy this report and want to keep up-to-date on all of our news sentiment research, make sure to subscribe below 😉

This past week we analyzed another 788 stock market news articles from across the internet and summarized the results of our analysis into this 5-minute report to help you gauge the aggregate mood about stocks and the market overall. A breakdown of how this report is written:

  1. This Week’s News Sentiment [1 min read]

  2. Most Mentioned Tickers in News Coverage [2 min read]

  3. Best and Worst Ticker Sentiment [3 min read]

  4. Weekly Market Mood Outlook [1 min read]

1. This Week’s News Sentiment 📰

Market sentiment fell sharply this past week to build on a turbulent month of news coverage. After last week’s blip of optimistic speculation, this week our sentiment and time-sense metrics recorded near-even scores, almost as if the slate has been cleared as we head into Q3 earnings season.

Overall, the average article published last week showed a 0.02 sentiment score — on a scale from -1.0 being most pessimistic and +1.0 being most optimistic, this is about as close to neutral as it gets. Given the news has historically shown an average weekly sentiment of around 0.17 on our scale, this week is comparatively one of the more pessimistic weeks of news coverage in recent months. In terms of time-sense (ie. the portion of words written in past-tense or future-tense across all articles published), this week’s articles were also markedly reactive (average score: -0.04), showing slightly more past-tense than future-tense language written about the markets. Here’s a look at the major news events driving conversation sentiment this past week:

📈 Stocks: The major U.S. stock indexes slipped on Monday and Tuesday but came back in a big way late in the week, rising around 2% overall to record their second positive week in a row. A strong start to quarterly earnings season provided a key catalyst.1 As of Friday, 80% of the S&P 500 companies that had reported third-quarter results exceeded analysts’ earnings estimates, according to FactSet. That so-called beat rate ranks above the 76% five-year average. Results were in from 8% of S&P 500 companies as of Friday, with many of the early reports coming in from major banks. 

₿ Cryptos: The price of Bitcoin rose above $60,000 on Friday, close to the record high that the cryptocurrency set six months earlier. As of Friday, Bitcoin’s price had jumped about 40% since the end of September, when it was around $44,000 as of Friday. On the whole, the global cryptocurrency market cap rose 5.6% on the week to a sum total of $1.3 trillion dollars.

🦅 Economy: Amid rising energy costs and disruptions in global supply chains, the recent spike in U.S. consumer prices extended into September, picking up slightly from August’s level. The Consumer Price Index rose 5.4% compared with the same month a year earlier. The latest increase is roughly in line with the elevated levels seen in June and July. On Thursday of this week, President Biden signed a bill to raise the nation’s debt ceiling, staving off a national default (which would be a first in history) for at least another month; almost in relief of the bill, markets rallied markedly on Thursday and Friday.

2. Most Mentioned Tickers 📊

Each week we analyze the number of headlines written about each stock and cryptocurrency. The most mentioned tickers in this week’s news and the tickers with the biggest volume increase compared to last week are shown below:

💻 Microsoft Inc. ($MSFT) saw some of the most news coverage of any stock this week appearing in more articles than 98% of all tickers. On the whole, $MSFT’s average sentiment in articles published this week was significantly optimistic (+0.39 on a scale from -1.0 to +1.0), driven by a 4% rise in share price on the week and a few enticing announcements/milestones from the company.

First, the company announced that it will be increasing its dividend to $0.62 on December 9th, which is in line with industry average and appears sustainable relative to the companies expected earnings per share over the next few quarters. Second, Microsoft announced plans last Friday to acquire Ally.io — a leading “objectives and key results” company — to add to its Viva family of services in an effort to improve the company’s employee experience platform (EXP).

The final Microsoft news event this week (and definitely the biggest) was its announcement that it will be shutting down its subsidiary LinkedIn in China following increased regulatory scrutiny, though the software giant’s other business will remain. While LinkedIn appears to be the only domino to fall, the question remains whether or not China’s increasingly difficult operating environment will cause Microsoft to pull other products from the country in the future.

3. Sentiment Winners and Losers 👍👎

Each week we summarize the most extreme sentiment scores in the news for each ticker to help you decide where to focus your attention. Here’s a look at which tickers scored the highest (and lowest) in terms of optimism, pessimism, speculation, and reaction expressed in this past week’s news:

Sentiment: Most Optimistic😀 and Pessimistic😒 Tickers

⛰️ Invesco QQQ Trust S1 ($QQQ) rebounds, analysts raise expectations: this week’s most optimistic ticker in stock market news coverage was the Invesco QQQ Trust (relative optimism: 100%), which is a composite index tracking the top 100 non-financial companies listed on the Nasdaq stock exchange. $QQQ rose nearly 3% this week back to $368.94 after falling more than 6% over the past month from its all-time highs set at the beginning of September.

$QQQ often serves as a lightning rod for conversation surrounding the Nasdaq as a whole; much of the optimism surrounding the Invesco QQQ in news coverage this week point to its recent recovery as confirmation that the broader markets are on track for further upward trajectory in the near term. In terms of sentiment, our algorithms suggest this week’s Invesco news coverage was the most optimistic it has been since early September, supporting analyst claims that the market’s local bottom occurred last week.

This week’s top $QQQ headlines and posts:

QQQ Stock Price Forecast: A Strong Bullish Breakout” TheWistle

“QQQ Bears were adamant we were going to keep going down. I don’t make the rules, price action and Kuba do.” | @Trendspider_J on Twitter (post here)

💾 Nvidia Corp. ($NVDA) analysts urge caution after stock’s all-time highs: this week’s most pessimistic ticker in news coverage was Nvidia. While $NVDA stock rose more than 6% on the week back towards its recent all-time high of $228 per share, the gains were discounted by pessimism in Nvidia’s news coverage, which centered around delays within the company’s acquisition of Arm. Nvidia agreed to purchase Arm (a British semiconductor and software design company) for $40 billion last September, but more than a year later and an agreement remains a long way off; UK and China regulators continue to review the deal citing potential security (ie. political) concerns, which makes the proposed deadline of March seem more and more unlikely.

Outside of Nvidia’s high-profile international acquisition, analysts also sewed pessimism in this week’s news coverage about the company’s ultra-high stock price. While Nvidia is certainly a quality company with strong positions in key markets and some very promising long-term earnings prospects, one has to wonder if the stock trading at such a high premium (compared to the company’s underlying value) is sustainable for much longer. In the words of Seeking Alpha’s Jonathan Weber: “No company can grow at 30% or more forever, and NVIDIA will also experience a slow down in its business growth returns going forward.” This week’s most pessimistic $NVDA articles:

“Nvidia’s Pending Arm Acquisition: What Investors Need to Know The Motley Fool

“Is Nvidia Stock a Buy, Sell, or Hold?” | Seeking Alpha

Time-Sense: Most Speculative🤔⏩ and Reactive😮⏮️ Tickers

 ☄️ Intel Corp. ($INTC) investors are on the fence heading into earnings: this week’s most speculative stock in news coverage was Intel. $INTC rose 1.2% back to $54.46 throughout the week, but the stock still trades in a narrow window well below its all-time high price of $70 set back in April of this year. Much of the speculation surrounding Intel stock this week surrounded its upcoming earnings report, scheduled for this Thursday, October 21st. While $INTC is definitely trading at bargain prices compared to its aforementioned competitor (ehem, $NVDA), analysts seem to agree that the company will see better days in the future — the question: when? Intel currently trades at just 12 times next yera’s earnings, but some say this may be too expensive given the company’s lack of innovation and revenues in recent months. Current earnings estimates forecast a 7.4% decline in Intel’s profits, and options traders are currently betting on $INTC share price to fall more after earnings. This week’s most speculative $INTC articles:

“Intel Stock Looks Doomed to Continue Its Downward Journey” InvestorPlace

“Is This the Beginning of Intel’s Redemption?” | The Motley Fool

🏦 Wells Fargo Corp. ($WFC) sentiment rises after encouraging earnings: this week’s most reactive ticker in stock market news coverage was Wells Fargo. $WFC’s stock price slumped heading into its Q3 earnings report Thursday morning, then promptly jumped 7% to end the week in the green. In their Q3 report, Wells Fargo announced EPS of $1.17 (easily clearing expectations of $1.00) and revenues of $18.8 billion (versus $18.3 billion estimates). The call revealed markedly lower noninterest expenses and a sharply improved credit outlook, signaling that the company’s management appears to be delivering on their vision of improvements to the company — as a result, news sentiment following the call has appeared relatively optimistic. Most notably for investors, Wells Fargo stepped up its share buyback program throughout the third quarter, repurchasing $5.3 billion of $WFC stock throughout the period, and announcing plans to increase dividends in the near future — both are great reasons to keep the stock on your waitlist. This week’s most reactive $WFC articles:

“Wells Fargo: Solid Q3 Earnings, Buyback To Power Stock Higher”  Seeking Alpha

Buy Undervalued Wells Fargo Stock for Its Big Buybacks” | Nasdaq

Biggest Mood Swings and Changes 🎭🔀

Each week we compare the sentiment of each ticker to its sentiment from the previous week. Presented below are the tickers that saw the biggest change in each of our four sentiment metrics this week compared to last.

🚗 Tesla Inc. ($TSLA) saw the largest increase in optimism AND reaction expressed this week compared to last week as the company prepares to release its third-quarter earnings report this Wednesday after close. With recent delivery scaling, the Zacks consensus earnings estimate has increased $0.10 over the past week to earnings of $1.57 per share — the bottom-line estimate implies a year-over-year surge of 77.6% EPS.

📳 Facebook Inc. ($FB) recorded the largest increase in pessimism expressed this week behind last week’s debacle. $FB stock has fallen 8.7% over the past month (its biggest decline since the beginning of the pandemic) after sweeping allegations about the company’s unethical internal practices were released on 60 Minutes last Sunday. To add insult to injury, Facebook, Instagram and WhatsApp suffered their biggest site outages ever last Monday.

🐤 Twitter Inc. ($GPS) posted the biggest increase in speculative language expressed this week compared to last after the company’s recent slew of feature announcements, including NFT profile picture verification (which could provide serious validation for the blossoming NFT market), and the ability for users to pay each other in Bitcoin via Twitter’s lightning network faster than any other platform on the planet. Both features have the potential to revolutionize the way we use social media — it would be great to have this newsletter in your 2030 time-capsule so you can look back and see whether or not I was right.

4. Market Mood Outlook 🌡️🔭

We are living in interesting times. Though the stock and cryptocurrency markets continue to rally near all-time high’s across the board as we head into Q3 2021 earnings season, the U.S. is experiencing some of its worst inflation and supply-chain pressures in recent memory (on top of the potential impending doom of a national debt default within the next few months). Understandably so, this past week we saw some of the more neutral news sentiment of the past year — analysts seem a bit perplexed as to what to forecast next given the dichotomy of the current investment environment.

While markets do appear to be on the verge of rallying handsomely behind upcoming earnings optimism (specifically between cyclical and technology stocks like $AMZN, $AAPL, $MSFT, $NVDA, and friends), the value of the dollar has decreased considerably over the past few months, and growing supply chain pressures and geopolitical uncertainties abroad have the potential to complicate things in the mid-term future. We will look ahead to a monstrous week of earnings from market staples like Netflix ($NFLX), Johnson & Johnson ($JNJ), United Air Lines ($UAL), AT&T ($T), Tesla ($TSLA), and American Express ($AXP) for more clarity in the near-term. For more context on the broader markets and the US’s economic outlook heading into the final quarter of the year, I found Edward Jones’ weekly market wrap from last week insightful: read it here. That’s all for this week folks — good luck in the markets, and thank you for reading! 😄🙏

Beta Test Our v1.0 News Analyzer!

After a few months of rigorous testing and development, we are rolling out the beta version of our v1 Babbl News Analyzer on babbl.dev! What started as an experiment at the beginning of 2021 has now grown into a living, breathing website that tracks the influence of news coverage on the stock market. Thank you to the roughly 1,000 of you who have been reading our weekly newsletter and following along with us on social media — it is with your continued support and encouragement that we’re able to be in the position to build this tool for you.

The beta is still a work in progress; in the meantime, we are looking for 100 beta testers to try it out and tell us your thoughts! In exchange, you’ll receive a 4-month free subscription to the official website when it’s launched at the end of this year (along with the pride of knowing you helped us create a truly impactful tool for fellow DIY investors). Check out our previous email below for instructions on how to become an official beta tester!