Late Rally Saves Week for S&P, Dow

The market’s weekly performance ended up looking a lot better than was expected just this afternoon, as stocks snapped their three-day losing streak with a sharp rally on Friday that pulled two of the major indices into the green.

The Dow was up 1.8% for the week, while the S&P managed a 0.8% advance. The NASDAQ still slipped by 2.1%. However, all of these indices were lower over the previous four days heading into Friday, especially deficits of 1.1% and 3.7% for the S&P and NASDAQ, respectively.

These performances offer a glimpse into one of the major themes of this past week. Money has been moving out of technology and into recovery names, underscoring the disparity between the Dow and NASDAQ.

The big story on Friday was the government employment situation report, which turned out much better than expected with the economy adding 379,000 jobs. The forecasts were for somewhere between 175,000 and 210,000. And for a little icing, the unemployment rate dipped to 6.2% instead of staying put at 6.3%.

This reading suggests the economic recovery may be faster and stronger than investors’ already lofty expectations. It also raises concern of overheating.

The market’s immediate reaction to the jobs report was for the 10-year Treasury yield to jump to the dreaded 1.6%, sending stocks sharply lower. However, the yield pulled back and the selling pressure was exhausted, leading to a sharp late-day rally.

The S&P finished the session higher by 1.95% to 3841.94, while the Dow was up 1.85% (or about 572 points) to 31,496.30. The beleaguered NASDAQ jumped 1.55% (or about 196 points) to 12,920.15, which means it’s again barely in the green for 2021 after sliding into negative territory yesterday.

What a crazy week! It was bookended with a couple of nice rallies and a rough three-day losing streak right in the middle. What will next week have in store for us?

Today's Portfolio Highlights:

Value Investor: There's a couple positions in the portfolio that Tracey wanted to sell now while she could still get a nice profit. Atlas Air Worldwide (NASDAQ:AAWW) continues having great quarters as its able to charge a premium due to high demand. However, the market seems to think this freighter aircraft company is purely a pandemic play that will come back to earth when we return to normal. Whether that’s true or not, the editor doesn’t want to take any chances. She sold AAWW on Friday for a 16.3% return in about seven months. Meanwhile, cabinet manufacturer American Woodmark (NASDAQ:AMWD) is facing inflationary cost pressures for things like wood and labor, which is likely to get worse moving forward. Tracey also sold AMWD today for a 6.3% return in about six months. Read the full write-up for more specifics on these moves. By the way, this portfolio had a top performer today as Penske Automotive Group (NYSE:PAG) rose 8.8%.

TAZR Trader: With the NASDAQ barely positive for the year after a double-digit correction, Kevin is getting ready for the bounce once all the weak hands have been flushed out. On Friday, he added more to payment processor Square (SQ). The editor first added this name back in November and it has climbed more than 13% in the portfolio since then. However, SQ is expected to continue growing even after the pandemic. Plus, its still at a great price. Read the full write-up for more on this move.

Counterstrike: Don’t expect Jeremy to sell into this tech dump, because he thinks it’s a huge overreaction. Instead, the editor decided to “nibble” on a name that has really pulled back in the last week. Rocket Companies (RKT) consists of personal finance and consumer service brands. Despite the pullback, this stock is still a Zacks Rank #1 (Strong Buy) that beat the Zacks Consensus Estimate by 37% in late February. The editor added a small, 4% allocation in RKT on Friday. Get a lot more details on this move in the full write-up.

Surprise Trader: Shares of Purple Innovation (NASDAQ:PRPL) got shellacked yesterday after its quarterly report, but Dave decided to stick with this mattress, pillow and cushions maker. He didn’t think the report was that bad and considers the selloff to be a complete overreaction. Well, the editor’s patience was the right move because PRPL bounced by nearly 28% on Friday, which made it the top performer of the day among all ZU names.

Headline Trader: "I believe that tech's correction is only a temporary reaction to the surging bond yields and reflation trade.

"The S&P 500 and the Dow remain buoyant in the first two months of 2021 trading, with energy and financials leading the rally.

"COVID winners are getting the foam blown off the top of their frothy valuations, and it is time to start picking up those niche tech players that will continue to thrive in the new normal economy." -- Dan Laboe

Have a Great Weekend!
Jim Giaquinto

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