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Well that’s what a selloff feels like. It’s been a long time since we’ve seen a drop like the one on Tuesday. The major indices started the session in the red and never even hinted that it might turn things around.
The Dow fell 1.37% (or a little more than 360 points) to 26,076.9...it’s biggest plunge since May of last year. The S&P slipped 1.09% to 2822.4 and the NASDAQ was off 0.86% to 7402.5. This marks the second consecutive session of sharp pullbacks for stocks, which is also something we haven't experienced in a while.
Specific reasons for today’s drop include rising bond yields and a rough session for healthcare. Generally though, the market has been running hot for a very long time and was primed to cool off. Jeremy has been talking about this pretty succinctly in Counterstrike for a while: "Stocks were aggressively sold today, following the laws of gravity that I have been mentioning for the last week." In other words...what goes up, must come down.
Even with today's gutcheck, the major indices go into the final day of January with strong performances for the month. The S&P and Dow are each up more than 5% and the NASDAQ has gained more than 7%. But it will now be hard for the indices to continue their four-week winning streak. Of course, there are several potentially market moving events in the next few days, including the State of the Union tonight, the Fed meeting, earnings reports for a few technology giants and tons of economic data...ending with Employment Situation on Friday.
In the portfolios, Counterstrike used the selloff to add more to a chip equipment maker, while Stocks Under $10 picked up a name that's in turnaround mode. Also, Surprise Trader had a double-digit winner and Short List swapped out four names. Give it all a look below:
Today's Portfolio Highlights:
Counterstrike: During the short-lived “tech wreck” last year, Jeremy took advantage of the plunge by buying a 5% allocation in Lam Research (NASDAQ:LRCX). Shares of the equipment supplier for chip wafer processing had slipped despite a strong earnings report. And now with the market in the midst of its first real pullback of 2018, the editor saw a great opportunity to double down on this Zacks Rank #1 (Strong Buy) and add another 5%. In addition to its solid quarter and fundamentals, the chart is showing a Fib long setup for LRCX. Learn more about this move in the full writeup. By the way, Jeremy also covered half of Tennant (TNC) for an 8.9% profit.
Stocks Under $10: After a few quarters of falling below quarterly earnings estimates, Accuray (ARAY) appears to be turning the corner. The radiosurgery company beat the Zacks Consensus Estimate in its most recent report and expects revenue to be at least flat with the final quarter. Earnings estimates ticked higher after the news and lifted the stock to Zacks Rank #2 (Buy) status. Brian Bolan thinks this is a company on the rise and so he added it to the portfolio on Tuesday. Get more specifics in the full write-up.
Surprise Trader: Earlier this month, Infosys (INFY) reported its sixth straight positive surprise. Shortly before the latest report, Dave added this IT services stock to the portfolio. The move really paid off as the editor sold it today for a return of 11.5%. As for tomorrow, Dave says there’s the potential for two big wins after the bell.
Zacks Short List: Four stocks were short-covered in this week’s adjustment. The names that left the portfolio include:
• Incyte Corp. (INCY, +3.5%)
• National Oilwell (NOV, +0.3%)
• Charter Communications (NASDAQ:CHTR)
• Vertex Pharma (VRTX)
The new buys that replaced these names are:
• Akorn Inc. (AKRX)
• Baidu Inc. (NASDAQ:BIDU)
• Fluor Corp. (NYSE:FLR)
• Liberty Global (NASDAQ:LBTYA)
Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.
All the Best,
Jim Giaquinto
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