Recovery stocks had a strong start to the new month (and week) on Monday, sending the Dow higher by more than 200 points as investors remain encouraged by a solid earnings season and a rapid pace of vaccinations. They’re also feeling pretty good about Friday’s all-important jobs report.
The Dow enjoyed the best performance of the day by advancing 0.70% (or nearly 240 points) to 34,113.23. The S&P rose 0.27% to 4192.66, but the NASDAQ slipped 0.48% (or about 67 points) to 13,895.12.
Stocks are coming off a very impressive April that saw the S&P and NASDAQ each advance by more than 5%. The Dow was up 2.7%. We enjoyed strong earnings, solid economic data and a Fed that constantly reiterated its super dovishness throughout the month.
We’re also returning from a week dominated by Big Tech earnings reports, especially Alphabet (NASDAQ:GOOGL) (GOOG), Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Facebook (FB) and Amazon (NASDAQ:AMZN). These tech giants all beat on both the top and bottom lines in their quarterly reports. And yet, the market was still disappointed with the results, which is what happens when you’re looking for perfection. The FAANGs + MSFT were down again on Monday, except for AAPL. The iPhone maker managed to gain 0.82%.
Speaking of earnings season, we’re still in the thick of it! Those tech names may take up most of the oxygen in the room, but there are still over 1,000 names going to the plate this week. Some of tomorrow’s big reports come from Pfizer (NYSE:PFE), CVS (CVS), ConocoPhillips (NYSE:COP) and Activision Blizzard (NASDAQ:ATVI).
But the biggest story of the week will likely be Friday’s Government Employment Situation. As you no doubt remember, last month’s report (which was released on Good Friday when the market was closed) was nothing short of epic. The economy added over 900K jobs, which was 250K better than expectations and doubled the previous month.
And the market is expecting nearly 1 million more in this report as well!
Today's Portfolio Highlights:
Technology Innovators: After selling three names last Friday (including cashing in a more than 50% winner), Brian thought it was time to “fill in some of the holes”. On Monday, he added Smart Global (SGH), a designer, manufacturer and supplier of electronic subsystems to OEMs. The company has beaten the Zacks Consensus Estimate in each of the past four quarters with an average surprise of 7.1%. Rising earnings estimates have made SGH a Zacks Rank #1 (Strong Buy), while the editor “loves” the valuation here with solid growth being presented as well. Shares of SGH were as high as $55 not too long ago, so it has a lot of ground to recover. Read the full write up for more specifics on this new addition.
Counterstrike: The casinos will be among the biggest beneficiaries of the economy’s grand re-opening, which was clearly on display in the quarterly report from Boyd Gaming (NYSE:BYD). This Zacks Rank #1 (Strong Buy) operates a multi-jurisdictional gaming company with properties in as many as 10 states, including Nevada, Illinois, Missouri, Ohio and Pennsylvania. The company beat the Zacks Consensus Estimate by 111% in its recent report, but still slipped about $10 afterwards like so many other strong performances this earnings season. But that's all right since it opens a fantastic opportunity for Jeremy. He added BYD on Monday with a 6% allocation, while also selling eBay (NASDAQ:EBAY) for a 9.4% return in two months and Rocket Companies (RKT) for a loss.
Surprise Trader: The past two quarters saw Gildan Activewear (NYSE:GIL) beat the Zacks Consensus Estimate by triple digits! And now it has an Earnings ESP of 7.69% for the quarter coming after the bell on Wednesday. There’s no way of telling if GIL is set for another outsized surprise, but it does seem poised for a third straight beat. Dave added this Zacks Rank #2 (Buy) on Monday with a 12.5% allocation, while also selling Potlatch (PCH) for a slight 0.6% increase in less than two weeks. Read the complete commentary for more on today’s action.
Blockchain Innovators: The dry bulk shipping stocks had a strong session on Monday, which helped Danaos (NYSE:DAC) become the best-performing stock on the day among all ZU names. Shares jumped 13.5% today and it’s now up approximately 130% in the service since being added in early January. DAC is a leading international owner of containerships and chartering vessels to many of the world’s largest liner companies. The company reports again in two weeks and will be going for a 15th straight positive surprise.
Black Box Trader: Half of the portfolio was replaced in this week's adjustment, which included a double-digit winner and a couple other positive returns. The stocks that were sold on Monday included:
• Deutsche Bank (DE:DBKGn) (DB, +13.3%)
• Toll Brothers (NYSE:TOL, +5.7%)
• ConocoPhillips (COP, +1.8%)
• CNH Industrial (NYSE:CNHI)
• US Steel (X)
The new buys that filled these open spots were:
• Dow (DOW)
• Graphic Packaging (NYSE:GPK)
• KBR (NYSE:KBR)
• Nucor (NYSE:NUE)
• Olin Corp. (NYSE:OLN)
Read the Black Box Trader’s Guide to learn more about this computer-driven service.
Headline Trader: "In the past 9 years, the S&P 500 has illustrated an average return of 5.3% over this once quiet summer period (May through October). These six months of summer might have been a market vacation in the past, but this new market doesn't take any holidays, and selling in May is no longer a rewarding strategy.
"That being said, I believe that an enormous amount of optimism has been priced into the markets, but as an investor, there is really no other place to put your money to work today. From real estate to commodities to cryptocurrencies, every other asset class is sitting at very expensive levels. Investors don't want to be holding fixed-income assets in an environment where interest rates are poised to keep rising. Obviously, cash is not attractive to be holding, with inflation already showing signs of soaring.
"The stock market remains the most attractive place to put your money to work, despite its seemingly frothy levels." -- Dan Laboe
Until Tomorrow,
Jim Giaquinto
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