A few of the country’s biggest retailers reported strong quarterly results on Tuesday… but, of course, the market didn’t care. In fact, a late plunge by all of the major indices gave us a second consecutive session of losses to begin the week.
The S&P slipped 0.85% to 4127.83 and is now off by more than 1% in two days, while the Dow dropped 0.78% (or around 267 points) to 34,060.66. The NASDAQ was up by nearly 1% at its height on Tuesday, but it eventually ended the day lower by 0.56% (or around 75 points) to 13,303.64.
The country’s biggest retailer reported a strong quarter before the bell today. Walmart (NYSE:WMT) beat the Zacks Consensus Estimate by 38.5%, while the top line also eclipsed expectations. Most importantly, the company raised its full year outlook. Even this finicky market couldn’t deny this strong quarter, as shares jumped more than 2% in the session.
That wasn’t the only major retailer with some impressive results on Tuesday. Home improvement giant Home Depot (NYSE:HD) and department store staple Macy’s (M) also beat expectations, as retailers are getting a boost from the stimulus payments and the lessening of restrictions amid the vaccine rollout.
However, HD was down 1.02% today as good reports have often gone unrewarded. Furthermore, M dipped 0.37% (though it had a healthy rally in the previous couple of sessions).
We’re going to have a lot of fun tomorrow too as this fantastic earnings season still has a few reports for us. Tomorrow’s big releases come from the likes of Cisco (NASDAQ:CSCO), Lowe’s Cos. (LOW) and Target (NYSE:TGT).
We’ll also be getting the Fed minutes on Wednesday. Powell & Friends certainly won’t want to unnerve the market, but investors are already rather anxious after last week’s surge in consumer prices.
“One thing to watch in the minutes will be any comments on acting on inflation. If there is a hint of fear that inflation is getting too hot, rates could start to rise and that wouldn’t be good for stocks,” said Jeremy Mullin in Counterstrike. “Additionally, we must watch for comments on tapering as that would be negative as well.”
Today's Portfolio Highlights:
Stocks Under $10: With tech coming under pressure these days, the market has been looking elsewhere for defensive plays in this volatile environment. So a company like Alto Ingredients (ALTO) is getting a lot of attention right now. This Zacks Rank #2 (Buy) is a producer of specialty alcohols and essential ingredients. ALTO has beaten the Zacks Consensus Estimate in two of the past three quarters, including a surprise of approximately 140% last time. Brian is most impressed with the company’s straight “As” across the Zacks Style Scores; its great valuation; and margins that are “exploding higher”. The editor added ALTO on Tuesday for all these reasons and to bring some more diversification to the service. Read the full write-up for more specifics on this new addition. In other news, this service had a top performer today as Cassava Sciences (NASDAQ:SAVA) rose nearly 6.5%.
Surprise Trader: After two straight sessions as the top performer among all ZU names, Dave decided to take some profit out of Dillard’s (DDS). The department store company reported a strong quarter last week, which sparked a couple days of double-digit gains. The editor sold half of the position on Tuesday for a more than 35% return in less than two weeks! He’ll let the other half run for a while longer. The new addition is bakery foods company Flowers Foods (NYSE:FLO), which has beaten the Zacks Consensus Estimate for the past six consecutive quarters. It now has a positive Earnings ESP of 5.41% for the quarter coming after the bell on Thursday, May 20. Dave added FLO today with a 12.5% allocation. In addition to this buy and selling half of DDS, he also sold all of Ruth’s Hospitality (RUTH) for a loss. Learn about all of today’s action in the complete commentary.
Zacks Short Sell List: Half of the portfolio was replaced in this week's adjustment. The stocks that were short-covered included:
• StoneCo (STNE, +9.4%)
• NovoCure (NASDAQ:NVCR, +7.2%)
• Chegg (NYSE:CHGG, +5.2%)
• Aramark (ARMK, +4%)
• China Lodging (HTHT)
The new buys that replaced these names were:
• Peloton Interactive (NASDAQ:PTON)
• PLBY Group (PLBY)
• Shift4 Payments (FOUR)
• Sunrun (NASDAQ:RUN)
• T-Mobile US (NASDAQ:TMUS)
Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.
All the Best,
Jim Giaquinto
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