Tech’s decline continued and accelerated on Wednesday, which eventually led to a late-day selloff that left all the major indices in the red.
As you would expect, the NASDAQ saw the sharpest drop by plunging 2.01% (or about 265 points) to 12,961.89. The index has now dropped more than 3% in the past two days after starting the week with an advance of 1.2% on Monday.
The FAANGs were all lower, especially Facebook (NASDAQ:FB, -2.9%), Netflix (NASDAQ:NFLX, -2.7%) and Apple (AAPL, -2%). Tesla (NASDAQ:TSLA) was off 4.8%, but Microsoft (NASDAQ:MSFT) managed to keep its loss to just under 0.9%.
But this time, we can’t blame rising bond yields for tech’s underperformance. The 10-year Treasury yield remained well below 1.7% for a third consecutive session. With the quarter coming to an end, investors appear to be re-positioning their portfolios and taking money out of high growth names to prepare for a post-pandemic economic boom.
“Patience is key when markets are acting this strange,” said Jeremy Mullin in today’s Counterstrike. “And with my idea that this is all quarter end madness, we might have another week of this confusing atmosphere. Just remember that cash is a position.”
Meanwhile, the S&P slipped 0.55% to 3889.14. The Dow has benefited from this rotation of late and the index looked like it would have a pretty good performance earlier in the day. However, the downside pressure was too much and it ended slightly lower by 0.01% (or about 3 points) to 32,420.06.
It was the Senate’s turn to hear from Fed Chair Jerome Powell and Treasury Secretary Janet Yellen. On Wednesday, they testified in front of the Senate Banking Committee. If Mr. Powell didn’t break any news in his statements on Monday and Tuesday, then it’s no surprise he didn’t make any waves today.
Basically, he expects a strong economy this year, but it’s still far away from goals that could prompt a change in policy. Therefore, the Fed will stay accommodative for the foreseeable future.
Today's Portfolio Highlights:
Home Run Investor: You may have heard about some investors switching over to value names at the moment. Well, rest assured that Brian considers such a move to be “blasphemy”, especially while we’re climbing a wall of worry to new highs. He will continue to be “all about growth". For example, the editor picked up Sapiens (SPNS) on Wednesday. This global provider of proven IT solutions has beaten the Zacks Consensus Estimate in each of the last four quarters with an average surprise of nearly 13% over that time. Furthermore, rising earnings estimates have made SNPS a Zacks Rank #2 (Buy). Brian also likes that the topline is expected to grow 20% this year and that margins edged higher over the past two quarters. In order to make room for SNPS, the service sold the underperforming Option Care Health (NASDAQ:OPCH) position. Read the full write-up for more on these moves.
Counterstrike: Shares of Canada Goose (GOOS) jumped to $50 after the popular outerwear brand beat the Zacks Consensus Estimate by 6% in early February. However, the stock has dropped about 20% since then, which gave Jeremy a very attractive price to enter before the next upswing. He added GOOS on Wednesday with a 4% allocation and wouldn’t be surprised if the stock gets to about $54. Read the full write-up for more on today’s move. By the way, the portfolio's short position in The RealReal (NASDAQ:REAL) was the best performer of the day among all ZU names with a gain of 6.4%. ProShares UltraPro Short QQQ (SQQQ) also made the Top 5 with a rise of nearly 4.8%.
Technology Innovators: If things start to improve for small-cap wireless names, then Clearfield (NASDAQ:CLFD) should be in store for a sharp upturn. This Zacks Rank #2 (Buy) has beaten the Zacks Consensus Estimate three times and matched once in the past four quarters. Over that time, CLFD has an average beat of 62%, so we know the surprises are pretty big. Brian really appreciates that this wireless equipment name is earning money, which is nice to see for a small cap. The editor also likes the topline growth of 40% in the most recent quarter and its improving margins. Therefore, he added CLFD on Wednesday, while also cutting his losses on CarGurus (NASDAQ:CARG) and Corsair Gaming (CRSR). See the complete commentary for more.
Surprise Trader: We’re in between earnings seasons at the moment, so Dave only has one more buy this week. He added Evolus (NASDAQ:EOLS), a medical aesthetics company that reports after the bell TODAY. The company has beaten the Zacks Consensus Estimate for five straight quarters now and has a positive Earnings ESP of 35.39% for the upcoming report. It topped by 22% last time. The editor added EOLS on Wednesday with a 12.5% allocation, while getting out of the disappointing Titan Machinery (NASDAQ:TITN) position. See the complete commentary for more on today’s action.
Until Tomorrow,
Jim Giaquinto
Recommendations from Zacks' Private Portfolios:
Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>
Zacks Investment Research