Stocks just couldn’t get anything going on Wednesday after all the good news that recently dropped, leading to a volatile session for the market that ultimately ended the three-day winning streaks for two of the major indices.
The Dow slipped 0.65% (or about 170 points) to 26119.61, while the S&P declined 0.36% to 3113.49. Both of the indices were higher earlier in the day, but finished around session lows as selling picked up in the final hour.
However, these declines barely made a dent in the more than 4% gains for each index over the previous three days.
The NASDAQ also declined into the close, but managed to finish in the green with a rise of 0.15% (or more than 14 points) to 9910.53. Therefore, the index has a four-day winning streak as investors played it safe by putting their money into tech.
Stocks are coming off a session with an inordinate amount of positive developments, including a significantly better-than-expected result for retail sales, a potential ‘breakthrough’ treatment for the coronavirus and a proposal for a $1 Trillion infrastructure plan.
Each of the indices advanced approximately 2% on Tuesday.
However, such optimism is being tempered at the moment by a rise in coronavirus cases both here in the U.S. and in China.
Investors are concerned that the uptick could impact the economy’s attempt to reopen and, therefore, threaten the recovery.
Meanwhile, this week’s Powell party continued on Wednesday with the Fed Chair testifying remotely in front of the House Financial Services committee. He suggested that Congress keep the pedal to the metal when it comes to fiscal support and not pullback too soon.
Mr. Powell has been talking about the uncertain future and the long road back from the virus in recent comments after the Fed meeting and yesterday in the Senate.
Today's Portfolio Highlights:
Home Run Investor: The restaurant sector has been showing a lot of strength recently, so Brian decided to add one of his favorite chicken places. El Pollo Loco (LOCO) is a quick-service restaurant chain that specializes in flame-grilled chicken in a variety of contemporary Mexican-influenced entrees. But the editor didn’t add this company on Wednesday just because he likes their product. LOCO has beaten earnings expectations in each of its last four quarters with an average surprise of 21.5%. The extent of those beats have been improving over time and reached 45% most recently. Also, rising earnings estimates have made LOCO a Zacks Rank #2 (Buy). Meanwhile, the portfolio sold its volatile Plantronics (NYSE:PLT) position for a 6.1% profit in two months, while also getting out of Allot Communications (NASDAQ:ALLT). The complete commentary has more on today’s action.
Counterstrike: This market isn’t providing Jeremy with a lot of opportunities to buy the dip, so he went out of the box with his addition on Wednesday. The editor bought Zscaler (NASDAQ:ZS), a Zacks Rank #1 (Strong Buy) cloud security company that has surged 35% since its solid quarterly report. The idea here is that the bulls are going to keep driving this stock higher, so he best get in now before the next leg up. ZS was added with a 5% allocation. Also, The Trade Desk (NASDAQ:TTD) is close enough to the portfolio’s targets, prompting Jeremy to sell the stock now and take a nice gain of 28.5% in just a couple of weeks. Read the full write-up for more on these moves. By the way, this portfolio had the best performer of the day among all ZU services with Spotify Technology (NYSE:SPOT) gaining 7.7%. The stock is also the biggest winner in the portfolio at the moment with a 32.4% return since being added in May.
Surprise Trader: We’re not exactly sure when Franklin Covey (FC) will be reporting next, but it usually happens in the last week of June. The important thing, though, is that this learning and performance solutions company has an Earnings ESP of 5.8% for the soon-to-be-released report. Last time, FC beat by 150%. Dave thinks this provider of consulting services and education programs is set to do it again, so he added the stock on Wednesday with a 12.5% allocation. Furthermore, the portfolio decided to take advantage of today’s gain in Chewy (NYSE:CHWY) to sell this online pet products company and bank a nice 10% return in just a little over two weeks. See the complete commentary for more.
TAZR Trader: If we’re going to be a more digital economy after the coronavirus, then its pretty important that our “technology ecosystem” is reliable. That's where PagerDuty (NYSE:PD) comes in. This Zacks Rank #1 (Strong Buy) provides digital operations management solutions that help its customers prevent and resolve business-impacting problems… such as outages. The company’s sales should cross $200 million this year, and then grow another 20% next year to cross $250 million. PD recently reported a strong start to the fiscal year and the institutional analysts are optimistic for its future despite a soft guidance due to virus uncertainty. Kevin wants to give this DX (digital transformation) upstart a chance, so he added it on Wednesday with a 7% allocation. Get a lot more specifics on this new buy in the full write-up.
Until Tomorrow,
Jim Giaquinto
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