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The Fed said exactly what the market wanted to hear at the conclusion of its two-day meeting on Wednesday, which gave the indices a late-day boost and a fourth straight day of all-time highs. Meanwhile, the ADP employment report was better than expected as we move toward the major jobs report on Friday.
As was widely expected, the Committee believes the economy is strong enough to begin tapering the monthly bond purchases later this month. The plan is to finish the tapering somewhere in the middle of 2022. Furthermore, a hike in interest rates still seems to be a ways off.
Most importantly for today though, the November reduction will be $15 billion, which is pretty close to expectations. The taper was so widely expected by investors that the only real danger of a negative market reaction was too sharp a cut. Well, that didn’t happen as the Fed managed to thread the needle again.
Stocks were quiet most of the session while waiting on the news, but then found a second wind. The NASDAQ jumped 1.04% (or nearly 162 points) to 15,811.58, while the S&P was up 0.65% to 4660.57. That’s five sessions of record highs for each index.
The Dow rose 0.29% (or almost 105 points) to 36,157.58. So the three major indices have closed at new highs all together for four straight days.
With the Fed out of the way and earnings season continuing to perform admirably, the next (and last) big event of the week is the Government Employment Situation on Friday. We got a precursor of that important report today with ADP employment, which came in better than expected.
Private payrolls added 571,000 in October, which easily surpassed expectations of only 400K and was slightly better than September’s number. Tomorrow we’ll be getting the weekly jobless claims number, which came to 281K last week for a third straight print below 300K and another pandemic-era low.
Today's Portfolio Highlights:
Home Run Investor: This portfolio is now just one position shy of being fully invested after Brian added TWICE on Wednesday. The first buy is Clarus (NASDAQ:CLAR), a leisure & recreation name with a great history of beating the Zacks Consensus Estimate. It topped in each of the last four quarters with an average surprise of 17%, and also has a great valuation and rising margins. The other addition is the biotech company AnaptysBio (NASDAQ:ANAB), which can boast a “robust” pipeline filled with solid partners. Therefore, the company has revenue coming in from drugs themselves as well as milestone payments. CLAR and ANAB are each Zacks Rank #2s (Buys). Read the full write-up for more on today’s action.
Counterstrike: You’d think that a 5% positive surprise and a raised fourth-quarter guidance would mean big things for a company like Synnex (SNX). However, shares of this business process services provider only went sideways after the report, which makes it a candidate for this portfolio. But Jeremy wasn’t that interested until the stock broke its 21-day MA with rising earnings estimates. Plus, SNX is now a Zacks Rank #1 (Strong Buy). The editor sees a good risk/reward setup heading into the end of the year, so he added SNX on Wednesday with a 10% allocation. Read the full write-up for a lot more on this new addition, including the stops and targets.
Surprise Trader: A Zacks Rank #3 (Hold) with a strong Earnings ESP can sometimes bring huge profits by catching analysts off guard with a solid beat. That’s why Dave “sprinkles in” these types of names every earnings season. You never know! Such is the idea behind today’s addition of PlayAGS (AGS), a designer and supplier of electronic gaming machines. The company has a very healthy Earnings ESP of 27.6% for the quarter coming after the bell tomorrow. AGS eclipsed the Zacks Consensus Estimate in four of the past five quarters, so the editor doesn’t mind taking a chance. He added AGS on Wednesday with a 12.5% allocation, while also taking a “small win” by selling Nucor (NYSE:NUE) for 8.5% in less than three weeks. Read the full write-up for more.
Zacks Short Sell List: Shares of Zillow Group (NASDAQ:ZG) plunged nearly 23% on Wednesday after the real estate services company decided to exit its home-flipping business. Therefore, the short in ZG climbed almost 23% in the session, which gave this portfolio the best performer among all ZU names today. Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.
Headline Trader: "The markets are on a roll, with the S&P 500, Dow Jones, and Nasdaq 100 all closing at record highs for the 4th consecutive session in the wake of the Federal Reserve's highly-anticipated asset tapering decision.
"Public equities drifted lower into the FOMC's post-meeting remarks as market participants shored up capital to prepare for the Central Bank's policy decision.
"This capital was quickly redeployed as investors finally appeared to agree with the Federal Reserve's (slightly accelerated) asset tapering plan, resulting in a relief rally for some of the most hindered corners of the market." -- Dan Laboe
Until Tomorrow,
Jim Giaquinto
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