We got a nice rally into the close on Friday that significantly narrowed the day’s losses, but it doesn’t change the fact that this was a dreadful week that flung the major indices into correction territory at unprecedented speed.
You know it’s been a bad time when you can smile at a more than 350-point plunge in the Dow. That was actually the index's second-best session over the past five days, which included losing over 1000 points twice (including its largest single-day point drop in history) and more than 800 points once.
Today’s pullback was nearly 1.4% to 25,409.36, which could have been a lot worse as the low of the day was another slide of more than 1000 points.
The Dow lost over 12%, or over 3500 points, in just five days. It had been at a new high a little more than two weeks ago.
The S&P slipped another 0.82% to 2954.22, bringing the weekly loss to nearly 12%. It was north of 3300 on Monday morning.
Guess what? The late rally helped the NASDAQ squeeze out a tiny gain on Friday! The index rose 0.01% (or about 0.89 of a point) to 8567.37 for the second positive close of the week.
Of course, it still lost over 1000 points this week, or more than 10%.
We all know the reason for this correction. The coronavirus continues to spread outside of China and we really don’t know what its impact will be on the global or U.S. economies.
That uncertainty is the thing that really unnerved investors, especially when the market was at all-time highs and poised for some pullback after a long run higher.
On Friday, Fed Chair Jerome Powell stated that the central bank was watching the situation closely and would act appropriately to mitigate the coronavirus’ impact on the economy. Investors expect more rate cuts are on the way.
We should take some solace from the late-day runup. When you're losing money at such a rapid rate, you need to appreciate any good news that comes along. But the most encouraging thing is that this week is now over.
No one knows what’s going to happen when trading resumes on Monday, especially since the coronavirus is so unpredictable. But sooner or later, investors are going to get back to buying… and they’ll have a lot of bargains to pick from.
Today's Portfolio Highlights:
TAZR Trader: Despite several institutional investors “yelling fire in the theater”, Kevin thinks this panic will end soon. And the market may bounce back so quickly that you’ll miss out on the first 5% or so, especially if you’re panicking a little yourself. Therefore, the editor suggests “letting the volatility come to you” so you can capitalize on it. On Friday, he added QQQ 3X Bull ETF (TQQQ), which will help you maximize the bounce back from the very start. The portfolio also had one of the best performers today with The Trade Desk (TTD) jumping 14.9% after reporting a great quarter with a solid guidance yesterday. The “reviews” from analysts have been mostly positive. Read the full write-up for more.
Value Investor: After plunging about 17% in just 5 sessions, JP Morgan (JPM) has gone from new highs just a few weeks ago to hitting this portfolio’s stop. Therefore, Tracey sold this banking giant for a 31.5% return. It’s a disappointing way to end this position’s three-year stay in the service, but the editor may be getting back into the name once the dust settles. She also sold Acco Brands (ACCO) for a 1.4% profit.
Healthcare Innovators: Hundreds of companies are being “thrown out with the bathwater” in this correction, according to Kevin. And that’s especially the case in the healthcare sector. Therefore, the editor added Direxion Healthcare 3X Leveraged Bull ETF (CURE) on Friday. This fund will move three times the Healthcare Sector (XLV), which was a bargain at around $90 at the time this was added. By the way, this portfolio easily had the best performing stock of the day, as Sangamo (SGMO) jumped 28%. This genomic medicine company announced a global collaboration with Biogen (NASDAQ:BIIB) that will use its zinc finger protein technology to treat several neurological diseases, including Alzheimer’s and Parkinson’s. Actually, this portfolio had four of the top five winners of the day with strong performances from Intellia Therapeutics (NTLA, +15%), Guardant Health (GH, +12.7%) and bluebird bio (BLUE, +8.3%). Read the complete commentary for more.
Counterstrike: "Take a breath and realize that we just went through one of the most violent sell offs in modern history. I traded the financial crisis and while the moves were large, there was more back and forth then this one. We went straight down for 6 days and finally went up the last 15 mins today.
"Now that we have this move on the chart I expect to better map out a path after we bounce. I do think we get a bounce, perhaps to the 200-day and then we will see. I was nervous about Corona when it first started, but the markets complacency made me complacent. Now we have some economic damage and there is a lot of uncertainty on how serious the spread will be.
"An exhausting week that gave us some lumps. While I think the Coronavirus is overrated, the economic damage might not be. We have to remain cautious until we get some clarity. But for now, we look to have put in a temporary bottom." -- Jeremy Mullin
Have a Great Weekend!
Jim Giaquinto
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