In an earlier post, we highlighted the details of the September NFIB Small Business Optimism report.  The report showed overall sentiment among small businesses has continued to improve as demand has bounced back (though it has not yet fully recovered as still more businesses report lower sales and earnings on a net basis) leading to low inventory levels, higher prices, and a need for more employment.  While generally improved conditions have lifted optimism, that is not to say small businesses have given an all-clear.  The Uncertainty Index from NFIB has risen each of the past three months with September’s 2-point increase bringing it back to the same level as March of this year.  In other words, it is perhaps best to say that small businesses are cautiously optimistic.

From the pandemic to the Election, there are plenty of reasons for businesses to be uncertain.  As for what they are reporting to be the biggest problems, labor remains at the top.  30% of businesses have reported that either cost (9%) or more predominately quality (21%) of labor are their biggest issues.  While off the highs from the past few years, the current readings are still historically elevated.

Behind labor, government related problems also are largely on the minds of business owners.  Government red tape and taxes combine to account for 29% of businesses’ biggest problems.  While that is a large share, neither of those indices are at any sort of extreme.

Poor sales, on the other hand, remains as the third major concern for businesses.  12% of businesses reported poor sales as the single most important issue in September, down from 15% in August and 7-percentage points lower than the April peak.  While improved, the number of businesses seeing demand as a major issue is still at some of the highest levels of the past several years.  Click here to view Bespoke’s premium membership options for our best research available.

Sentiment among small businesses continued to improve in the month of September according to the NFIB’s monthly Small Business Optimism Index.  As shown below, the index rose 3.8 points to 104 which is now just half of a point below the levels prior to the pandemic in February.  That was also better than expectations of a smaller improvement to 101.2.  Small business sentiment has now risen in four of the past five months.

In the table below, we break down this month’s report by each of the ten components of the headline number as well as the many other indices included in the report such as those not used as inputs to the headline number and what small businesses are reporting to be their biggest problems.

Across all indices of the September report, breadth was solid with only a couple of indices falling month over month—Expected Credit Conditions and Credit Conditions Availability.  Some of those that were higher saw record or near-record month-over-month increases.

Some of the most notable indices this month included those regarding inventories.  The Current Inventories index which gauges the net percent of owners viewing current inventory levels as too low rose 2 points to a record high reading of 5.  Given this, the index for Plans to Increase Inventories is tied with the reading from November of 2004 for a record high of 11.  Indicating low inventory levels, the report is consistent with some other recent data like the regional Fed manufacturing surveys. Those low inventories are resulting in higher prices as that index’s 12-point increase in September marked the biggest one month gain on record. While the Higher Prices index is not at any sort of an extreme, September’s move indicates that a rising number of businesses are raising prices.

Additionally, those higher prices and lower inventory numbers appear to be a result of demand that continues to rapidly improve.  The indices for Actual Sales and Actual Earnings Changes remain negative for a sixth and tenth month in a row, respectively, meaning a net number of businesses continue to see lower rather than higher top and bottom-line numbers.  But these indices are seeing big moves higher.  For the index of Actual Earnings Changes, the 13-point climb in September was the largest on record and the 9-point increase for Actual Sales Changes followed a 13-point increase in August; both being some of the largest one-month moves on record. In order to meet the needs of this demand, a higher number of businesses plan to increase employment with that index rising to 28; the highest level since December of 2018.  Even though businesses seek to hire more, they also report it is hard to fill positions as the index of Job Openings Hard to Fill rose to the top 5% of all readings.  Cost and quality of labor also were reported as two of the most pressing problems for businesses.  Click here to view Bespoke’s premium membership options for our best research available.

The Q3 earnings season began in earnest this morning with the first of the big banks (C and JPM) reporting.  As shown below, the number of reports per day will get larger and larger over the next few weeks with the peak coming in the first week of November.

As we do at the start of each earnings season, below is our list of the most volatile stocks on earnings.  These are stocks with at least ten years of quarterly earnings reports that have historically seen the biggest price moves on their earnings reaction days.  (For a stock that reports after the close, its earnings reaction day is the next trading day’s change.  For a stock that reports before the open, its earnings reaction day is that day’s change.)

As shown, Infinera (INFN) is the most volatile stock on earnings for those stocks with at least ten years of earnings reports.  INFN has historically averaged a one-day change of +/-15% on its earnings reaction days.  Stamps.com (STMP) ranks second with an average change of +/-13.5% on earnings, followed by Glu Mobile (GLUU) and Conn’s (CONN).  Netflix (NFLX) ranks fifth on the list with an average one-day change of +/-12.29% on earnings.  NFLX is by far the biggest stock on the list with sales estimates this quarter of $6.4 billion.

Other notables on the list of most volatile stocks include iRobot (IRBT), Overstock.com (OSTK), First Solar (FSLR), Align Tech (ALGN), and Booking Holdings (BKNG).

Most stocks on the list below don’t report earnings until later this month or in early November.  Netflix (NFLX) and iRobot (IRBT) are the stocks on the list that will report first on October 20th.

If we broaden our list to include stocks that only have at least 10 quarterly earnings reports, a lot of new names show up that haven’t been public for very long.  At the top of the list below is Roku (ROKU) which has had 12 quarterly reports in its history.  ROKU has historically averaged a one-day change of just under 20% (19.1%) on its earnings reaction day.  It’s pretty incredible for a company to average a 20% swing in its market cap on one day every three months.

The first eleven stocks on the list below are not on the list above because they don’t have more than ten years worth of quarterly earnings data.  These include names like Snap (SNAP), the Container Store (TCS), Stitch Fix (SFIX), Groupon (GRPN), and At Home Group (HOME).  Other well-known stocks that normally see huge moves in reaction to earnings include Fitbit (FIT), Yelp (YELP), Canopy Growth (CGC), Canada Goose (GOOS), Wayfair (W), and Lending Tree (TREE).  Try out our Earnings Explorer tool for free with a two-week trial to Bespoke Institutional.