A sharp drop in oil prices put heavy pressure on the major indices this Friday, but the market still made it out of the week with positive performances.
The NASDAQ finished up with a gain of 1.1% on a nice week for technology. The other indices didn’t fare as well, but the S&P still advanced 0.3% over the past 5 days while the Dow increased 0.2%. While not dramatic, these gains were a return to the plus side after last week's modest losses.
The market had to face two of its biggest concerns head-on this week: trade and rates. On Monday, it looked like a trade war could be averted by an encouraging sentiment from Treasury Secretary Steven Mnuchin, but President Trump threw cold water on the idea the very next day by saying he was “not satisfied” with China trade talks.
The Fed took centerstage Wednesday with dovish minutes that suggested breaching 2% inflation wouldn’t immediately trigger a fourth rate hike this year.
And just to make things even more interesting, the long-awaited June 12th summit with North Korea was called off by the President yesterday. Stocks dropped on the news but largely recovered by the closing bell. In the aftermath, both parties are being civil and suggest that a meeting could still take place. We’ll see...
The Friday session was curtailed by rumors that OPEC and Russia have plans to increase output, leading to a more than 4.5% dip in crude to well under $70. The NASDAQ managed to pull out a gain amid these pressures with a rise of 0.13% to 7433.9. The Dow and S&P each slipped by 0.24% to 24753.1 and 2721.3, respectively. Both indices came well off their lows of the day.
Now it’s time for summer! The market is closed on Monday for Memorial Day, which can be considered the start of the season. It’s time for barbeques, baseball, bike rides and extremely low volume in the market. It started today and will continue for much of the next three months or so, which can add another challenge for investors.
“Memorial Day weekend has always been the start of summer, but also the start of summer trading. This is when things start to slow down and aggressive traders can get hurt. Just keep in mind that as we head into the summer to tone it down if your strategies aren’t working. Don’t overtrade and whatever you do, remained disciplined,” said Jeremy in Counterstrike.
Today's Portfolio Highlights:
Insider Trader: The plunge in crude today gave the portfolio a great opportunity to cash in some big winners. Tracey sold half of Lonestar (LONE) and Encana (ECA), which are a couple of the more volatile E&P holdings. LONE secures a nice return of more than 28% for the portfolio and ECA banked nearly 15%.
But the biggest winner was Nine Energy Services (NINE), as the editor sold the remaining position for an approximately 36% profit. You may remember that the portfolio sold the first half earlier this month for a nearly 20% gain. NINE tends to be really volatile when crude declines. It’s important to note that Tracey is still a fan of energy stocks and believes today’s selloff was just a “blip” for long-term investors. Read the complete commentary for more on today’s moves.
Healthcare Innovators: The portfolio needs more exposure to the Medical Info Systems space, so Kevin added a very small player that should benefit from industry consolidation and the premium valuations of its peers. Computer Programs and Systems (CPSI) has a market cap of only $445 million, but carries a very attractive valuation for its size. And technically speaking, the editor believes it has built a nice base since a big gap down from $39 in 2016 and seems set to move higher. Get more specifics on this new addition in the full write-up.
Options Trader: "The markets closed narrowly mixed today, but higher for the week. That makes it 2 out of the last 4 weeks for the Dow and the S&P, 3 of the last 4 weeks in the Nasdaq, and 4 weeks in a row for the Small-Cap Russell 2000 Index, which closed at another new all-time weekly high.
"There was plenty of news out this week including trade issues and geopolitical concerns. But the overriding info that rightly moved the market the most were the economic reports that continued to show a growing economy and surging corporate profits.
"With the Russell 2000 Small-Cap Index (usually a great barometer of what’s to come for the rest of the market), breaking out to all-time highs, the rest of the market should soon follow. And I’m expecting more upside follow through next week.
"Even though we only have a 4-day trading week next week, the market is poised to add to their gains in earnest." -- Kevin Matras
Have a Great Memorial Day Weekend!
Jim Giaquinto
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