Late Selloff Puts an End to Dow’s Winning Streak

The indices sold off in the final hour and ruined the Dow’s four-day winning streak, while tech investors took some profits as many of the industry’s biggest and most influential leaders prepare to report earnings.

The Dow (NYSE:DOW) soared nearly 400 points shortly after the open, but quickly came back to earth and bounced around for most of the session. It was holding onto a gain of approximately 100 points in the final hour, but sometimes those last 20 minutes can be a real pain.

It ended with a loss of 0.13% (or abound 32 points) to 24,101.55. The index stayed above 24K, but the winning streak is history.

The S&P jumped by more than 1% this morning too, but doesn’t seem ready to hit 2900 just yet. It ran into resistance while closing the gap and finished with a decline of 0.52% to 2863.39.

The NASDAQ underperformed its counterparts for the second consecutive session, which is something we’re not used to. It plunged a full 1.4% (or approximately 122 points) to 8607.73.

Stocks were solidly higher to start the week yesterday as a number of states begin to ease restrictions and take small steps toward reopening their economies.

Tech has been a real superstar for the market this month, as the space helped stocks recoup more than half of the recent virus-induced selloff. But some of the heaviest hitters are reporting this week, so investors are playing it safe.

All of the FAANGs were lower on Tuesday: Netflix (NASDAQ:NFLX, -4.16%), Alphabet (NASDAQ:GOOGL) (GOOG, -3.31%), Amazon (NASDAQ:AMZN, -2.61%), Facebook (NASDAQ:FB, -2.45%) and Apple (NASDAQ:AAPL) (AAPL, -1.62%. This was the second straight day these names lost ground.

However, GOOG shares have soared nearly 9% after hours, following a decent quarterly report that included better than expected revenue.

In fact, all of the FAANGs are up after hours, as of this writing. So perhaps the tech space will get a boost tomorrow.

Of course, the biggest shot-in-the-arm would be more strong earnings reports from FB and MSFT tomorrow and then AMZN and AAPL on Thursday.

In addition to another round of earnings reports, the market will also be paying attention to Fed Chair Jerome Powell’s news conference tomorrow. The Committee has taken extraordinary measures to help the economy during this shutdown. Investors will be watching for hints on the future, though we shouldn’t expect any details during such an unpredictable time.

And we’ll also get our first look at Q1 GDP on Wednesday.

Today's Portfolio Highlights:

Counterstrike: The S&P ran headlong into resistance this morning as it tried to get to 2900, which tells Jeremy that the next 100 points higher will be pretty tough. Therefore, he made several moves on Tuesday, including a short in Planet Fitness (NYSE:PLNT) with a 5% allocation. This gym operator bounced significantly during all this talk of reopening, but its still a Zacks Rank #5 (Strong Sell). The editor also picked up a couple of inverse ETFs, including a 5% position in ProShares UltraPro Short Dow30 (SDOW) and a 4% position in ProShares Ultra VIX Short-Term Futures ETF (UVXY).

But there was room for another long position as well. Teladoc (NYSE:TDOC) has been hot since the country was infected with the coronavirus. People would much rather talk to a doctor remotely rather than taking the chance of catching something at the hospital. And this probably won’t change when things get back to normal. However, today it is down sharply, so Jeremy decided to take a small 4% position in this Zacks Rank #2 (Buy). Learn a lot more about these moves in the full write-up.

Stocks Under $10: It looks like this portfolio is going to reach its goal of 15 names by May 1, as Brian added #14 today by picking up Digital Turbine (NASDAQ:APPS). The company offers products and solutions for mobile operators, device OEMs and third parties. The company has beaten the Zacks Consensus Estimate in three of the past four quarters. The editor was most impressed with its rising earnings estimates, which is rare these days and underscores its status as a Zacks Rank #1 (Strong Buy). Read the full write-up for more on today’s move and be ready for the #15 position on Thursday.

Large-Cap Trader: The portfolio enjoyed good performances from Centene (NYSE:CNC) and Lockheed Martin (NYSE:LMT), but John is kind of bored with them now. On Tuesday, he sold these names and swapped them with a couple of more exciting growth stocks. CNC brought a return of 8.5% and LMT earned 6.3%.

One of the new buys is Advantest (ATEYY), a Zacks Rank #1 (Strong Buy) leading automatic test equipment supplier to the semiconductor industry. John believes this stock has a lot more room to recover and is impressed with its average surprise of 27.5% over the past four quarters. It reports again on April 30. The other buy is Adobe (NASDAQ:ADBE), one of the largest software companies in the world and a Zacks Rank #2 (Buy). The editor sees share price momentum building in this name, which reports again on June 16. It has missed just once in the past four years. Importantly, these new buys should be able to weather this coronavirus storm better than most. Read the full write-up for more specifics on today’s moves.

Technology Innovators: It looks like investors are getting out of Teladoc (TDOC) ahead of its quarterly report tomorrow. Brian decided to join them on Tuesday while he could still bank a double-digit profit. This provider of virtual access to healthcare was sold today for a 29.4% return in about 6 weeks. The editor will replace TDOC tomorrow. Meanwhile, this portfolio had the best performing stock of the day among all ZU names as Enphase Energy (NASDAQ:ENPH) jumped 15.6%.

Surprise Trader: On Tuesday, this portfolio added Compass Diversified (CODI), a company that buys and manages middle-market businesses. It currently has a diversified portfolio of 10 operating subsidiaries and $650 million in cash for future acquisitions. It reports after the bell on Thursday and has an Earnings ESP of 4.85%. Dave bought CODI with a 12.5% allocation, while also selling Citrix Systems (NASDAQ:CTXS) to make room for more buys during this busy week of earnings season. Read the full write-up for more. In other news, (CURO) rose nearly 15.1% to become the second best performer of the day.

Zacks Short List: The portfolio cashed in a double-digit winner in this week’s adjustment. The stocks that were short-covered include:

• Ceridian HCM (CDAY, +20.9%)
• Zimmer Biomet (ZBH)
• Burlington Stores (NYSE:BURL)
• China Lodging (HTHT)
• Trane Technologies (NYSE:TT)
• Marriott Int'l (NASDAQ:MAR)

The new buys that filled these open spots were:

• Etsy (NASDAQ:ETSY)
• GDS Holdings (NASDAQ:GDS)
• Royal Caribbean (NYSE:RCL)
• Ryder (R)
• T-Mobile US (NASDAQ:TMUS)
• Twitter (TWTR)

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