The markets remained mixed heading into a new week on Monday, but technology really got shellacked as investors are more interested in recovery names at the moment.
Contrary to what we saw throughout the pandemic, the NASDAQ has been lagging its counterparts recently. However, today’s pullback was on a different level as the index plunged 2.46% (or more than 340 points) to 13,533.05. That’s the worst session of February and second steepest loss of the year so far (after the 2.61% drop on January 27).
Unsurprisingly, the FAANGs took it especially hard, including Apple (NASDAQ:AAPL, -2.98%), Amazon (NASDAQ:AMZN, -2.13%), Alphabet (NASDAQ:GOOGL) (GOOG, -1.73%) and Netflix (NASDAQ:NFLX, -1.19%). And for good measure, we also saw big declines from former high-flyers Tesla (NASDAQ:TSLA, -8.55%) and Microsoft (NASDAQ:MSFT, -2.68%).
The S&P has its own problems as today marked its fifth straight session in the red. The broad index, which also has heavy exposure to tech, slipped 0.77% to 3876.50.
Meanwhile, the Dow not only managed to close in the green on Monday, but it also staged an impressive comeback after dropping well over 100 points earlier in the day. It was up 0.09% (or about 27 points) to 31,521.69.
The Dow was the only major index to finish in the green last week… though it did so barely by rising only 0.1%. The S&P slipped 0.7% over the four days, while the NASDAQ dropped 1.6%.
Despite all the good stuff out there (e.g. stimulus, vaccines, a strong earnings season); investors are a bit wary of rising bond yields and higher inflation right now. They see this as a good time to move money out of the flashy tech names and into areas that should benefit from the economy reopening.
Of course, the big concern is the Fed raising rates faster than expected, which means all eyes will be on Chair Jerome Powell’s testimonies in front of Congress this week. He’ll certainly reiterate the Committee’s support for the economy, but no one knows what this skittish market will focus on.
Mr. Powell will be in front of the Senate Banking Committee tomorrow and then the House Financial Services Committee on Wednesday. And let’s not forget that this week will also see hundreds more earnings reports as this better-than-expected season continues.
Today's Portfolio Highlights:
Headline Trader: Shares of Uber (NYSE:UBER) dropped sharply after the ride-sharing staple reported mixed quarterly results earlier this month. However, Dan thinks this company is poised to come out of this pandemic stronger than ever. He’s very impressed with its rapid acceleration into the delivery space through Uber Eats and soon Postmates. In fact, the delivery segment grew by 224% year over year, which was just what was needed during this pandemic. Furthermore, the editor thinks that rising margins and its growing presence internationally bode well for the future. To sum it all up, Dan sees UBER as being perfectly positioned between recovery and growth, so he added the stock on Monday with a 6% allocation. Make sure to read the full write-up for much more.
Surprise Trader: Ever since going public in mid-2019, Grocery Outlet (GO) has been beating the Zacks Consensus Estimate. This operator of ‘small-box’ stores (15K – 20K square feet) topped by 117% last time for its sixth consecutive positive surprise. Now this Zacks Rank #2 (Buy) has a positive Earnings ESP of 5.6% for the quarter coming after the bell on Tuesday, March 2. Dave added GO on Monday with a 12.5% allocation and also sold Century Communities (NYSE:CCS) for a nice 15.6% return in less than three weeks. See the full write-up for more on today’s action.
TAZR Trader: Even with the vaccines entering the country’s bloodstream, we’re still going to need covid testing for the foreseeable future. That was Kevin’s idea behind buying Quidel (NASDAQ:QDEL) last year before the rollout began, and it’s the same today. He recently received some support from a major brokerage firm, which reiterated an “outperform” rating on QDEL while stating that “demand continues to outstrip supply”. The editor thought this was a good time to buy more QDEL. Read the full write-up for more specifics on this move, along with comments on Square (SQ) ahead of earnings.
Blockchain Innovators: You may not think that stainless steel products manufacturer ZK International (ZKIN) would have much blockchain exposure. However, a closer look uncovers xSigma, a wholly-owned subsidiary with a decentralized finance platform dubbed “DEX”. That platform runs on the Ethereum blockchain using xSigma’s SIG coin, which is backed by the US dollar. Dave added ZKIN on Monday and warns that it’s a “highly speculative” name, which has worked out well for this portfolio in the past. The editor also ended the “frustrating ride” of International Money Express (NASDAQ:IMXI) by the selling the name today for a 7.1% return in under five months. See the complete commentary for more on today’s moves.
Technology Innovators: All the ‘chip shortage’ stories out there had Brian thinking about increasing exposure to the space. And it just so happens that there’s an open space in the portfolio AND a Zacks Rank #1 (Strong Buy) from that area. Therefore, the editor added Vishay Intertechnology (NYSE:VSH) on Monday, which is a global manufacturer and supplier of semiconductors and passive components. The company has beaten the Zacks Consensus Estimate three times and matched once in the past four quarters, amassing an average surprise of 66% over that time. As the high Zacks Rank attests, earnings estimates for VSH are on the rise. Brian also thinks the valuation is attractive. Get more in-depth on this new addition in the full write-up.
Commodity Innovators: The country’s recent cold spell plus snowstorms failed to lift ProShares Ultra Bloomberg Natural Gas (BOIL), so Jeremy sold the name on Monday and moved into a new position that will thrive while energy prices stay elevated. The editor added EnLink (ENLC), which provides midstream energy services. The natural gas chart is still bullish, and ENLC is involved in the gathering, treating, processing, transmission, distribution, supply and marketing of that commodity. Jeremy was impressed when the stock held its ground after dipping to its 50-day and really appreciates its 9% dividend. Plus, ENLC is getting some love from a major firm, which recently upgraded the stock. Read the full write-up for more on today’s moves.
Black Box Trader: This week's adjustment included only one change. The portfolio sold U.S. Steel (X) for a 3.9% return and replaced it by adding Vista Outdoor (NYSE:VSTO). In addition, this service had one of the Top 5 performers of the day among all ZU names as Olin Corp. (NYSE:OLN) rose 5.3%. Read the Black Box Trader’s Guide to learn more about this computer-driven service.
Have a Good Evening,
Jim Giaquinto
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