We should all be talking about this great earnings season right now. Instead, the big news is what a spoilsport the market has turned out to be. Unfortunately, it didn’t perk up on Monday either. The major indices all started the session solidly on the positive side, but then started their pouty trek lower to finish in the red.
The S&P dropped 0.82% to 2648.1, while the NASDAQ was off 0.75% to 7066.3. The Dow was down 0.61% to 24,163.2.
“Today, May selling was the narrative. Financial media is blaming the upcoming month on the old saying (‘Sell in May, and go away’), which I think is a joke,” said Jeremy Mullin in Counterstrike. “Just remember the S&P has been higher each May over the last 5 years. In fact, the worst month over the last 50 years is actually September."
How about some good news? The major indices managed their first positive month since January. The Dow and S&P each advanced by about 0.3% for April, while the NASDAQ just barely closed in the green by less than 0.1%. These results feel disappointing when taking into account the strength of earnings season, but it still marks an impressive improvement over last month. In March, the Dow and NASDAQ slipped by 3% or more, while the S&P dropped 2.5%.
The market heads into May with many of the same concerns that impacted April, especially rising rates and geopolitical uncertainties such as trade issues. But this week will offer A LOT of news that could potentially break through all the worry.
Apple reports tomorrow. The iPhone maker’s numbers are always a big deal, but it’s all the more important this time after recent warnings for smartphone sales from the likes of Morgan Stanley (NYSE:MS) and Taiwan Semiconductor. Furthermore, not only are there tons of earnings reports scheduled for release, but we’ll also get the turn-of-the-month economic deluge that concludes with the employment situation report on Friday.
And let’s not forget that there’s a Fed meeting this week. No one is expecting them to hike rates this time…but everyone will be watching closely for any change in language that hints at their views on inflation or changes in the “dot plot”. The market continues to hope that there will only be three hikes this year instead of four.
Today's Portfolio Highlights:
Counterstrike: Anything goes in the next few days as earnings season really takes off this week. Jeremy wanted to prepare by making moves on both the long and short sides, so he put together these three trades on Monday:
• Caterpillar (NYSE:CAT): Despite a strong quarter with a 33% positive EPS surprise and a raised fiscal year outlook, the CEO’s “high water mark” statement really took a bite out of this industrial bellwether. However the editor is seeing two areas of technical support and thinks this stock could eventually rebound to around $188.
• Echo Logistics (ECHO): This company could be considered a “trucking broker”, so it used high freight costs to report a strong first-quarter performance with a positive EPS surprise of 42%. But like CAT, shares dropped after an initial spike higher. Jeremy thinks this name is also primed to move higher after the HFT games.
• Canadian National Railway (CNI): And now for something completely different, shares of this Zacks Rank #5 (Strong Sell) actually moved higher after reporting a negative earnings surprise. However, the editor doesn’t believe this will last, so he decided to short it. The stock is teetering on a precipice that could see it plunge 10% if the market moves lower.
Each of the names were added with 7% allocations. Read the full write-up for more specifics on these moves.
Healthcare Innovators: The risk/reward scenario for Sangamo Therapeutics (SGMO) is favorable again! You may remember that the portfolio pulled a more than 155% profit out of this genomic therapies company back in February. Given all the acquisitions and partnerships that have been happening in the space of late, it looks like this stock has plenty of room to recover from its technically weak situation at the moment. Learn more about today’s moves in the full write up.
Black Box Trader: The portfolio sold five names in this week’s adjustment. Four of them were positive and one was a double-digit winner. The deletions include:
• Guess (GES, +11.5%)
• AES Corp (AES, +7.5%)
• Archrock (AROC, +3.3%)
• Verifone Systems (PAY, +0.9%)
• Westrock (WRK)
The new buys that replaced these names are:
• Dollar General (DG)
• Kohls Co. (KSS)
• Anthem (ANTM)
• Fiat Chrysler (FCAU)
• Fluor Corp. (NYSE:FLR)
Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.
Zacks Confidential: With the market growing so volatile this year, it’s no surprise at all that there are now 2140 registered ETFs in the US with about $3.5 trillion in assets under management. ETFs give investors a way to spread out the risk instead of relying on a single company. Neena Mishra is our Director of ETF Research here at Zacks, and Kevin asked her to give an update on the ETF landscape. Learn about the different types of funds and get three recommendations to consider by clicking: Most Interesting New ETFs of 2018.
Until Tomorrow,
Jim Giaquinto
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