NASDAQ Ends Three-Week Skid Despite Rising Yields

Soaring bond yields kept the Dow and NASDAQ on separate paths on Friday, but it wasn’t enough to spoil the week. The major indices all finished these five days with solid gains… and even a couple new all-time highs.

The Dow rose 0.90% (or about 293 points) today to 32,778.64, while the S&P was up 0.10% to 3943.34. Those are new closing records for both; the third straight for the former index and the second straight for the latter.

Unsurprisingly, the Dow had the strongest week with an advance of 4%, as it is benefiting from the recovery rally amid a new, massive stimulus and accelerated vaccine rollout. The S&P was up 2.6% for the week.

The NASDAQ slipped 0.59% (or around 78 points) on Friday to 13,319.86. However, the index broke a three-week losing streak by rising 3% over the five days, thanks to sharp rallies of 3.7% on Tuesday and 2.5% yesterday.

It’s been a crazy week for the NASDAQ, which began with a 2.4% plunge on Monday that put the index in correction territory. But now it’s down less than 6% from its closing high from mid-February.

Tech’s big problem today was the 10-year Treasury yield soaring well past 1.6% on Friday. It moved above that mark on Monday, but pulled back and moderated in the subsequent few sessions.

The major news of the week was passage of the $1.9 trillion covid relief package. Talk about warp speed! The plan was approved by the Senate last weekend with the House following on Wednesday. And then the President signed it yesterday with the first $1400 checks probably going out this weekend.

The market is very optimistic right now, though rising rates and inflation fears continue to bother many investors. With earnings season pretty much over and little economic data on the schedule, next week’s Fed meeting could move the market.

The Committee keeps saying that the economy is still far from the goals that would necessitate a change in policy, but you never know what investors will focus on in the language.

Today's Portfolio Highlights:

Headline Trader: The biggest story in the market right now is the economic reopening, so you can probably tell what Dan was thinking when he added Home Depot (NYSE:HD) on Friday with a 6% allocation. This home improvement giant has traded sideways over the past six months, but it might be ready to break out again as Americans get those $1400 checks as part of the $1.9 trillion stimulus plan. HD is a stable cyclical play with secular characteristics and a “reasonable” valuation. The editor considers this cyclical diversification play to be a “no-brainer” in the current environment. Read the full write-up for a lot more on today’s addition.

Blockchain Innovators: The semiconductor – general industry space is in the Top 16% of the Zacks Industry Rank, which was where Dave went for today’s addition. He picked up Amtech Systems (NASDAQ:ASYS), which makes capital equipment used by customers that manufacturer semiconductors. It’s a hardware play with some pretty impressive growth expectations for both the top and bottom lines. For example, current year EPS growth is set for 157%, while sales growth is seen at 14.5%. Expectations for next year are solid as well. The full write-up has more on this buy. Be on the lookout for another addition early next week. Meanwhile, Camtek (NASDAQ:CAMT) made the top movers list today with an advance of 10.6%.

Insider Trader: The upcoming economic reopening has invigorated insiders, so Tracey added two new stocks on Friday. S&T Bancorp (STBA) is a community bank that should benefit from a return to normal and the rising 10-year Treasury yield. A director bought 2300 shares earlier this week, while a different director bought 2000 back on February 17. These insider buys are all the more encouraging since STBA shares are up 23.5% over the past month. The other buy today was Carrol’s Restaurant Group (TAST), the largest franchisee of Burger King with 1010 restaurants. The $1400 stimulus checks should really help this company’s stalled out shares. On Monday, a director (and 10% owner) bought 75,000 shares. The editor will be adding these names with allocations of between 6.5% and 7.5% each after splitting the proceeds from selling Conagra Brands (NYSE:CAG, +9.9%) and Myers Industries (NYSE:MYE, +8.9%). Read the full write-up for a lot more on today’s action.

ETF Investor: Spending on consumer items and services is likely to surge in the weeks ahead as the vaccine rollout continues and the stimulus checks are sent. In order to capitalize on this return to normalcy, Neena added the Invesco DWA Consumer Cyclicals Momentum ETF (PEZ) on Friday. This fund selects and weights US consumer cyclical stocks by price momentum. About a third of its 30 stocks are restaurants, hotels and leisure names, which will be among the biggest beneficiaries of the rebound. PEZ has a “reasonable” expense ratio of 60 basis points and over $97 million in assets. The editor strongly suggests using a limit order. To make room for PEZ, the portfolio sold SPDR Gold MiniShares Trust (GLDM) for a 14.6% return. The full write-up has more on today’s moves.

Surprise Trader: The homebuilders have been successful in the portfolio of late, so Dave went “back to the well” on Friday by adding Lennar (NYSE:LEN). This Zacks Rank #2 (Buy) has beaten earnings expectations for seven straight quarters now and has a positive Earnings ESP of 7.99% for the report coming after the bell on Tuesday March 16. Last time it beat by approximately 18.5%. The editor added LEN today with a 12.5% allocation, while also selling Purple Innovations (PRPL) for a loss. Read the complete commentary for more. In other news, this portfolio had a top performer on Friday as Golden Entertainment (NASDAQ:GDEN) rose 11.3%.

Value Investor: Even with stocks hitting new highs all over the place, there’s still value out there if you know where to look. Fortunately, Tracey does know where to find them! On Friday, she added Micron (NASDAQ:MU), which fulfills this portfolio’s need for some semiconductor exposure. Last week, this Zacks Rank #2 (Buy) raised its EPS and sales guidance during a fiscal second quarter update. The editor thinks this is a sign that a new “up” cycle has begun. Check out the full commentary for all the specifics on the MU addition, including a detailed look at its value characteristics.

Have a Great Weekend!
Jim Giaquinto