SPECIAL ALERT: The November episode of the Zacks Ultimate Strategy Session will be available for viewing no later than Wednesday, November 10. Kevin Matras, Tracey Ryniec, Daniel Laboe and David Bartosiak will cover the investment landscape from several angles in this popular event.
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▪ Tracey and David Agree to Disagree on whether investors should still buy Bitcoin after hitting new highs
▪ Kevin answers your questions in Zacks Mailbag
▪ David and Daniel choose one portfolio to give feedback for improvement
▪ And much more
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New records just keep coming along with solid earnings reports. However, investors kept one eye on the market and one eye on the Fed in Tuesday’s session, as we wait for details of their two-day meeting.
It was a calm day overall for stocks given all the anticipation over taper news tomorrow, but we’re at a point when any positive close means new history. The three major indices have now all reached new highs together for the third straight session.
The Dow closed above 36K for the first time ever by rising 0.39% (or about 138 points) to 36,052.63. The S&P rose 0.37% to 4630.65, while the NASDAQ advanced 0.34% (or around 53 points) to 15,649.60. Tuesday’s session actually marked four straight days of new highs for the latter two indices.
In addition to the continuation of earnings season, investors will have other things on their minds the rest of this week. Tomorrow’s Fed remarks and Friday’s jobs report are the two biggest events over the next three days.
First things first. Most investors appear comfortable with the Committee beginning to scale back over 100 billion dollars in monthly asset purchases now that the economy seems on its way to recovering from the pandemic. But by how much?
“Tapering is fully expected, the only question is if the amount comes in as expected. The consensus is that the change will be gradual and finally wind down to zero in the middle of next year,” said Jeremy Mullin in Counterstrike.
“We are talking about $140 billion in purchases slowly fading away, starting with a drop to, let’s say $120-30 billion. Markets shouldn’t react violently either way unless the Fed opens up to an accelerated slow down.”
We’ll also be getting the ADP employment report tomorrow, which is a precursor to the big Government Employment Situation. Last month, the report of private payrolls came in at 568K, which broke a couple monthly disappointments by beating expectations of only 425K. Tomorrow’s forecast is for about 400K.
The ISM services report also comes out on Wednesday. The ISM manufacturing report kicked off this crazy week of data yesterday by coming to 60.8 in October, which beat expectations and stayed solidly in expansion territory above 50.
Today's Portfolio Highlights:
Surprise Trader: In late August, DICK’S Sporting Goods (DKS) reported its fifteenth positive surprise in the past sixteen quarters... just as Dave expected. The stock was so solid subsequently that the editor hung onto it for two more months. But now, he wants to take the “win”. So DKS was sold on Tuesday for nearly 18.4%. The service also got out of Denny’s (DENN) today. The new addition is Newark Group (NMRK), a Zacks Rank #2 (Buy) commercial real estate advisory firm. The company topped the Zacks Consensus Estimate for four straight quarters with an average surprise of 32% over that time. And now it has a positive Earnings ESP heading into the next report on Friday before the bell. NMRK was added today with a 12.5% allocation. See the complete commentary for more on today’s moves.
Counterstrike: The portfolio bought twice and sold once in a busy Tuesday session. The new buys are recreational boat & yacht retailer MarineMax (HZO) and automotive retailer AutoNation (NYSE:AN). Both of these stocks are Zacks Rank #1s (Strong Buys) that recently reported solid quarters. HZO beat by 25% and guided FY22 higher, while AN topped by more than 17% and announced that its buying back $1 billion worth of stock. Jeremy added these names with allocations of 12% and 5%, respectively. Meanwhile, Zoom Video (ZM) was sold for nearly 10% in less than a month after slipping to a Zacks Rank #4 (Sell). See the complete commentary for more on today’s moves.
Headline Trader: The surge in oil prices is looking a bit “toppy” to Dan, especially after WTI crude futures failed to break above $85 again after multiple attempts. That may be why shares of Chevron (NYSE:CVX) have been unsuccessful in breaking through $115 despite a solid quarterly report. So the editor decided to sell half of CVX on Tuesday for a more than 15% return in about two months. He’ll hang onto the other half for now in case of a temporary demand surge in winter. By the way, it looks like Dan added Riot Blockchain (NASDAQ:RIOT) at just the right time. The company was one of the best performers among all ZU services on Tuesday by climbing 13.6%... just one day after it was added to the portfolio.
Stocks Under $10: You might remember Sangamo Therapeutics (SGMO). The biotech was in the portfolio last year and brought a profit of more than 31% when it was sold in August after approximately three months. Now that the stock is pulling back from double digits at the start of September, Brian wants to see if history can repeat itself. SGMO is a Zacks Rank #2 (Buy) that showed growth of nearly 30% in the most recent quarter. As for next year, sales growth is expected at 16%. The editor added SGMO on Tuesday, while also getting out of SunOpta (NASDAQ:STKL). Go to the complete commentary for more.
Zacks Short Sell List: The portfolio replaced three positions in this week's adjustment. The stocks that were short-covered included:
• Zurn Water Solutions (ZWS, 2.2%)
• Aptiv (NYSE:APTV)
• Enphase Energy (NASDAQ:ENPH)
The new additions that replaced these names are:
• Twitter (NYSE:TWTR)
• United Airlines (UAL)
• Zillow Group (NASDAQ:ZG)
Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.
Options Trader: "We’ll also get the FOMC Announcement and the Fed Chair Press Conference. Nothing is expected to happen with rates. But traders are expecting the Fed to finally begin their long-awaited, and widely anticipated, bond taper (buying $10 billion a month less in Treasuries vs. the $80B a month they buy now, and $5 billion a month less in mortgage-backed securities vs. the $40B a month they buy now).
"Could be more, could be less, we’ll have to see. The only real surprise would be if they chose to not begin their taper yet.
"They were pretty clear it was coming soon, and Fed watchers interpreted that to mean at the conclusion of their November FOMC meeting, which is tomorrow. But they never came out and said it per se. So while it’s widely assumed, it’s not a done deal until they announce it. And that’ll come at 2:00 PM EST, with the Fed Chair Press Conference at 2:30." -- Kevin Matras
Have a Great Evening,
Jim Giaquinto
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