Stocks had a rough start to the week with each of the major indices plunging well over 1%.
It was quite a change from last Monday, which saw stocks rally and the NASDAQ soar by more than 2.5%. That performance was the only reason stocks managed to eke out gains for the week.
So, we’ve got a good-sized deficit to overcome if this weekly winning streak is to continue.
The NASDAQ dropped 1.65% (or about 192 points) today to 11,478.88. This marked the fifth straight day of losses for the tech-heavy index, though it ironically had the best performance last week by advancing 0.8%.
The FAANGs were all down sharply with Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) (GOOG) and Amazon (NASDAQ:AMZN) slipping 2% or more. Facebook (NASDAQ:FB) didn’t do much better with a drop of 1.7%.
However, Netflix (NASDAQ:NFLX) almost made it into the green by slipping only 0.01%. This streaming giant will be the first FAANG to report earnings tomorrow after the close.
The S&P was off 1.63% to 3426.92, while the Dow was down 1.44% (or around 410 points) to 28.195.42.
Thanks mainly to last Monday’s rally, these indices are on three-week winning streaks. However, they barely made it into the green on Friday. For example, the Dow was up by less than 0.1% over the five days.
The market remains preoccupied with stimulus, especially with coronavirus cases on the rise in the cooling weather. So it’s a headline-driven situation, just like earlier in this pandemic and during the trade tensions from years back.
Unfortunately, there are no breakthroughs to report. Speaker Pelosi and Treasury Secretary Mnuchin continue to talk, which is helping to keep the possibility alive for the market.
But this weekend the Speaker proclaimed a 48-hour deadline for a deal that would expire tomorrow, though it remains to be seen if this is on any more solid ground than President Trump calling off talks a couple weeks ago.
In the meantime, we’ve got earnings season. It’s off to a pretty good start, though not getting the attention it deserves due to all the stuff above.
In addition to Netflix, Tuesday will see reports from Procter & Gamble (NYSE:PG), Texas Instruments (NASDAQ:TXN), Lockheed Martin (NYSE:LMT), Snap (NYSE:SNAP), and dozens of others.
Today's Portfolio Highlights:
Options Trader: The automotive industry is on the upswing right now, so Kevin added TWO names from this space on Monday. Firstly, he bought to open a March 95.00 call in Visteon (NASDAQ:VC), a Zacks Rank #2 (Buy) automotive supplier that makes climate, electronic, interior and lighting products for vehicle manufacturers. Next, the editor bought to open a March 145.00 Call in Lear Corp. (NYSE:LEA), a Zacks Rank #1 (Strong Buy) supplier of automotive seating systems, electrical distribution systems and electronics. Both stocks report next week (VC on 10/29 and LEA on 10/30) and are in the top 17% of the Zacks Industry Rank. VC has an Earnings ESP over 100% for the upcoming report, while LEA has one more than 15%. Read the full write-up for more specifics on these moves.
Counterstrike: With election and earnings volatility in the air, Jeremy decided to cash in some double-digit profits on Monday. He thinks Crocs (NASDAQ:CROX) is due for a pullback, so he sold the rest of this footwear maker for nice 42.5% return in about two-and-a-half months. Zendesk (NYSE:ZEN) may have pulled back after reaching the portfolio’s target, but the editor says that’s close enough. The software development company was sold today for a 17.6% profit in under two months.
Technology Innovators: The portfolio began the week in the same way it ended the last one… by buying! This time, Brian picked up eGain Corp. (NASDAQ:EGAN), a Zacks Rank #1 (Strong Buy) provider of customer engagement solutions. The company has beaten three times and matched once in the past four quarters. Full-year estimates have moved sharply higher, which explains its high Zacks Rank. For example, analysts have boosted this fiscal year to 20 cents from 7 cents. This addition makes 14 names in the portfolio, which means its one shy of being fully invested. See the full write-up for more.
Surprise Trader: Earnings season heats up further this week. It's going to be an exciting time for this portfolio, so Dave kicked things off on Monday by adding... a glass company? Actually, the glass business may not be as boring as it seems, especially if it includes the smart glass on your phone. Such is the case with Corning (NYSE:GLW). And yes, the company also handles the glass for the new iPhone 12. Last time, GLW doubled expectations with a positive surprise of nearly 130%. Now it has a positive Earnings ESP of 0.59% for the quarter coming before the bell on Tuesday, October 27. Dave added GLW on Monday with a 12.5% allocation, while also selling Watsco (NYSE:WSO) after the Earnings ESP for this HVAC equipment distributor turned negative. Learn more about today’s action in the full write-up.
Stocks Under $10: Before tomorrow’s addition, Brian decided to clear out a few positions in the portfolio. And one of them brings a double-digit gain. The editor sold transportation services provider U.S. Xpress Enterprises (USX) on Monday, which marks a 28.7% return in just under three months. He also sold Del Taco Restaurants (NASDAQ:TACO) and Tufin Software Technologies (NYSE:TUFN). In other news, this portfolio had a top performer on Monday as Maxar Technologies (NYSE:MAXR) rose 5.9%.
Black Box Trader: The portfolio swapped out three positions in this week’s adjustment. The stocks that were sold today included:
• Lennar (NYSE:LEN)
• D.R. Horton (DHI)
• PulteGroup (NYSE:PHM)
The new buys that replaced these names were:
• Jabil (JBL)
• LKQ Corp. (NASDAQ:LKQ)
• Target (NYSE:TGT)
Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.
Until Tomorrow,
Jim Giaquinto
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