Fed Rescues Market (Again) from Steep Morning Pullback

The major indices started this week in the green, but it needed help from the Fed to overcome a sharp morning selloff brought on by fears of a second coronavirus wave.

Chair Jerome Powell said that the central bank had a lot of tools at its disposal and would do whatever it takes to support this economy… and he keeps proving it.

On Monday, the Fed said it would start buying individual corporate bonds, which the market liked to hear amid renewed volatility over the virus and pace of reopenings.

The Dow went on quite a ride today by plunging over 760 points at its worst before soaring by nearly 290 points at its best. It dipped into the negative in the final hour again but ultimately finished higher by 0.62% (or about 157 points) to 25,763.16.

The index gained nearly 2% on Friday but was down 5.5% for the week.

The S&P was off by about 2% early in the day, but managed to gain 0.83% to 3066.59 by the close.

However, the NASDAQ outperformed the major indices again with a rise of 1.43% (or around 137 points) to 9726.02. Obviously, tech had a good day, so this advance differs from the more optimistic “reopening rally” of early this month and late May.

The S&P and NASDAQ are coming off a week that saw declines of 4.7% and 2.3%, respectively.

We’ll practically have wall-to-wall Powell this week, as the Chair will be speaking three times in the next four days. He’ll be appearing before the Senate tomorrow and the House on Wednesday, and then will be part of a virtual discussion on Friday.

His somber outlook for the economic recovery on Wednesday was one of the main reasons why the market took such a steep step back last week. We already know that he’ll be talking about supporting this economy at all costs, but investors will be especially interested in his tone.

But before Powell speaks tomorrow, we’ll get a read on the U.S. consumer with the retail sales report for May. The market is expecting a rebound from the previous month’s horrible report that saw a plunge of 16.4% for April.

Today's Portfolio Highlights:

Blockchain Innovators: If you’re talking about e-commerce payments and transactions, then Dave can’t help but think of blockchain. That’s why he bought PFSweb (NASDAQ:PFSW) on Monday. This Zacks Rank #2 (Buy) is an international provider of transaction management services for traditional and e-commerce companies. PFSW has seen a “significant uptick in volume” since its quarterly report last month, while earnings growth for this year and next are expected at 80% and 22%, respectively. The editor also decided to cash in Alibaba (NYSE:BABA) for a nice 53.5% win! Read the full write-up for more.

Stocks Under $10: Amid second wave fears and civil unrest, shares of Bed Bath & Beyond (NASDAQ:BBBY) have dropped another 20% and are now in the wheelhouse of this portfolio. Brian believes this specialty retailer of domestic merchandise and home furnishings has a brighter future once we get past this difficult time. He notes that its losses are expected to narrow significantly to 52 cents next fiscal year from $2.34 for this fiscal year, which is a big improvement and the reason for its status as a Zacks Rank #2 (Buy). Plus, BBBY has beaten earnings estimates in three of the last four quarters. Read the complete commentary for a lot more on this new addition, and be ready for another buy tomorrow as the editor works on getting back to a full portfolio of 15 names.

Insider Trader: The portfolio needs more large-cap exposure, so Tracey jumped on an opportunity to buy CME Group (NASDAQ:CME). This is the largest futures exchange in the world in terms of trading volume and notional value traded. Speaking of trading volume, the company saw a lot of it during the coronavirus sell-off, which helped it put together a solid first quarter report. Last Thursday when the Dow plunged over 1860 points, a director stepped in and bought 1229 shares. The editor considers that a strong bullish signal. Therefore, she bought CME on Monday with a 10% allocation. The complete commentary has a lot more on this new pick.

Technology Innovators: Chips have been the place to be lately, so Brian decided to go with the flow by adding Semtech (NASDAQ:SMTC (NASDAQ:SMTX)) on Monday. This Zacks Rank #1 (Strong Buy) makes a wide range of analog and mixed-signal semiconductors for commercial applications. The editor likes this company’s earnings history, which includes four straight surprises with an average beat of 8.6%. And as its Zacks Rank attests, earnings estimates are on the rise over the past 30 days. Meanwhile, the portfolio also sold Facebook (NASDAQ:FB) for a 47.2% return in just under three months as both political parties have problems with the social media pioneer. Pluralsight (NASDAQ:PS) was also sold for a loss. Read the complete commentary for more on all today’s moves.

Black Box Trader: Half of the portfolio was replaced in this week's adjustment. The stocks sold today included:

• B&G Foods (NYSE:BGS, +11.9%)
• Sprouts Farmers Market (NASDAQ:SFM)
• United Natural Foods (NYSE:UNFI)
• Cheniere Energy (NYSE:LNG)
• Blue Apron (APRN)

The new buys that replaced these names are:

• AerCap (AER)
• H&R Block (NYSE:HRB)
• KB Home (NYSE:KBH)
• LPL Financial (NASDAQ:LPLA)
• Sportsman's Warehouse (NASDAQ:SPWH)

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing. By the way, this portfolio had one of the top performers of the day with Camping World Holdings (NYSE:CWH) rising 8%.

Have a Great Evening,
Jim Giaquinto