Dow Stays in Record Territory to Start Short Week

Last week’s more reserved market pace continued on Tuesday as we returned from the three-day break, leaving two of the major indices lower for the session. However, we still saw a new all-time high.

The Dow kept the good times rolling with a rise of 0.2% (or about 64 points) to 31,522.75, marking back-to-back sessions with record closes. This performance was the second time in less than a week that the Dow made history while the other indices took a step back.

The NASDAQ actually lagged its counterparts today, as tech took a bit of a break while the energy and financial sectors led the way. The index was still only off by 0.34% (or about 48 points) to 14,047.50. The S&P was nearly breakeven with a decline of only 0.06% to 3932.59.

The major indices jumped by 1% or more last week and finished Friday’s session at all-time highs. Stocks have been calmer of late compared to the first week of February, but are still inching higher while waiting for the market’s next decisive move.

Some investors are getting concerned with the yields, as the 10-year climbed past 1.25% today for the first time in nearly a year.

“Any fast movements in the bond market could cause portfolio managers to rethink allocations of their biggest winners,” said Daniel Laboe in the new Headline Trader, which had its first picks today (see below).

“You can see this concern showing its colors in today’s index returns, with the growth-propelled NASDAQ 100 showing weakness, while the value-driven Dow Jones Industrial Average remains buoyant,” he continued.

For the moment though, investors have most of their attention on the present, especially with new stimulus on the horizon and the vaccine rollout continuing.

And let’s not forget that there are still hundreds of earnings reports scheduled for this shortened week, as this better-than-expected earnings season continues.

Today's Portfolio Highlights:

Headline Trader: The first picks for this new service were released today! Daniel Laboe chose three stocks with robust headline-driven momentum that are trading at a fundamental discount in their industries. The first buys are:

• Alibaba (NYSE:BABA) – a play on the digital revolution in Asia
• Virtu (VIRT) – a play on volatility amid the “retail trading revolution”
• Skyworks (NASDAQ:SWKS) – a play on the need for connectivity in the 5G rollout

The editor added BABA and VIRT with 10% allocations each, while SWKS has an 8% allocation. Read the complete commentary for extensive analysis of these first picks and to learn about Dan’s stock-picking thought process as we embark on this new portfolio.

Stocks Under $10: This portfolio cashed in a pair of double-digit winners before the three-day weekend on Friday, and today Brian replaced one of them. He picked up EMCORE (EMKR), an electronics manufacturer that makes chips for the broadband, fiber optic, satellite and terrestrial solar power markets. The company has beaten the Zacks Consensus Estimate in the past three quarters, while rising earnings estimates have made the stock a Zacks Rank #2 (Buy). Its margins showed “drastic improvement” of late, which the editor loves to see since it means the stock could run to double digits in the next several months. The service now has 13 names after the recent sells and today’s buy, which Brian considers to be the “appropriate exposure level to the overall market” at the moment. Read the full write-up for more. In other news, this portfolio had a top performer today when Cassava Sciences (NASDAQ:SAVA) jumped 12.4%. The stock is also the best performer over the past 30 days with a surge of approximately 390%.

Surprise Trader: There’s still plenty of earnings season left, so Dave isn’t taking any breaks. On Tuesday, he picked up Primoris Services (NASDAQ:PRIM), a Zacks Rank #1 (Strong Buy) that operates as one of the largest specialty contractors and infrastructure companies in the U.S. The company reported double-digit surprises in each of the last two quarters. Looking forward, it has a positive Earnings ESP of 4.55% for the quarter coming after the bell on Monday, February 22. The editor added PRIM today with a 12.5% allocation, while also selling Terex (NYSE:TEX) for a 1% advance in about a week. See the full write-up for more on today’s action.

Commodity Innovators: Uranium stocks have been looking very bullish of late, so Jeremy decided to add some exposure by picking up Cameco Corp. (NYSE:CCJ). Most of the names in this field have a low market cap or can be considered quite risky. But the editor considers CCJ to be “best in breed”. Read the complete commentary for more on this new addition and to discover why uranium is so popular these days. Jeremy also did some fine-tuning to the portfolio on Tuesday by selling Schlumberger (NYSE:SLB) and IPath Series B Bloomberg Coffee Subindex Total Return ETN (JO) for gains of 27.1% and 11.8%, respectively, in less than five months. IPath Bloomberg Cocoa Subindex Total Return ETN (NIB) was also sold for a slight loss.

Marijuana Innovators: This portfolio continues to dominate the top movers list. Not only did it have the three biggest winners on Tuesday, but they were also all higher by double digits. The noteworthy performances came from Aphria (NASDAQ:APHA, +28.3%), HEXO (NYSE:HEXO, +22.6%) and Aurora Cannabis (NYSE:ACB, +12.9%).

Zacks Short Sell List: Half of the portfolio was replaced in this week's adjustment. The stocks that were short-covered included:

• BioMarin Pharmaceutical (NASDAQ:BMRN, +1.05%)
• Marriott Int'l (NASDAQ:MAR)
• Intuit (NASDAQ:INTU)
• Nuance Communications (NASDAQ:NUAN)
• Square (SQ)

The new buys that filled these open spots were:

• Ceridian HCM (CDAY)
• China Lodging Group (HTHT)
• TAL Education (TAL)
• Teradata (NYSE:TDC)
• Viasat (VSAT)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

Black Box Trader: The portfolio cashed in two double-digit winners in this week's adjustment, which is coming a day later than usual due to President's Day. The four stocks that were sold included:

• Alcoa (NYSE:AA, +21.1%)
• Vista Outdoor (NYSE:VSTO, +10.7%)
• Ford Motor (NYSE:F, +0.9%)
• KB Home (NYSE:KBH)

The new buys that replaced these names were:

• Camping World (CWH)
• Taylor Morrison Home (NYSE:TMHC)
• Valero Energy (NYSE:VLO)
• XPO Logistics (NYSE:XPO)

Read the Black Box Trader’s Guide to learn more about this computer-driven service. By the way, this portfolio made the Top 5 scoreboard on Tuesday as U.S. Steel (X) rose 12%.

Have a Great Evening,
Jim Giaquinto