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New Strain Overshadows Stimulus Deal, but Stocks Recover

By Zacks Investment ResearchStock MarketsDec 21, 2020 09:15PM ET
New Strain Overshadows Stimulus Deal, but Stocks Recover
By Zacks Investment Research   |  Dec 21, 2020 09:15PM ET
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Scary headlines of a new coronavirus strain overseas sent the market tumbling this morning, but stocks staged a nice recovery in the second half and finished the first day of this holiday-shortened week with little change.

The Dow had plunged approximately 400 points earlier in the session, but became the only major index to finish on positive ground. It was up 0.12% (or about 37 points) to 30,216.45.

The NASDAQ slipped 0.10% (or around 13 points) to 12,742.52, while the S&P bounced back from a 1% deficit to decline by only 0.39% to 3694.92.

Stocks are returning from a decent week that saw the NASDAQ improve 3%, while the S&P and Dow rose 1.3% and 0.4%, respectively.

By now you’ve heard that a more contagious coronavirus strain was recently discovered in the U.K. The country immediately stepped up its restrictions. And this new variant is probably already here in the U.S.

That’s just about the worst news we could hear and the market dropped as you’d expect. However, subsequent reports stated that the vaccines should be able handle this new strain.

Nonetheless, the market was so entranced that – believe it or not – the new stimulus deal was overshadowed. Can you believe that? After months of wrangling and worrying, Congress finally agrees on something and it gets upstaged by a new variant of covid.

Nevertheless, the package is a big deal as the $900 billion agreement will include direct checks to Americans and funding for small businesses, among other aspects.

But even if the stimulus was the main story of the day, it might not have led to a market rally. The deal was widely expected. It would’ve been a much bigger surprise if they completely failed to do something before Christmas.

As Dave Bartosiak said in today’s Surprise Trader: “While the score at the end of the day certainly was red, overall it was a great session for stocks.”

Today's Portfolio Highlights:

Insider Trader: You won’t run into a whole lot of people on the open water, which explains why boats have become quite popular during this time of social distancing. Take MasterCraft Boat Holdings (NASDAQ:MCFT) as an example. This small cap maker of recreational powerboats recently reported its most profitable quarter in history. More impressively, the company raised its revenue and EPS forecast. But as far as Tracey is concerned the most intriguing thing about MCFT is that two directors bought for the first time last week. And they’re buying with shares at 52-week highs, so they must think the company will continue to prosper in the future. Plus, shares are still cheap on a P/E basis. The editor added MCFT on Monday with a 7.4% allocation. Read the full write-up for a lot more on this new buy.

Healthcare Innovators: The biggest winner on Monday among all ZU names was easily Editas Medicine (NASDAQ:EDIT), which soared just under 30%. But that's not much of a surprise as this stock has jumped approximately 200% since Kevin added it less than three weeks ago! There was no big news for the company today, but the editor sees three reasons for the surge: 1) investment from ARK Invest, 2) short interest, and 3) the “fanatic” interest from retail investors in the age of Robinhood. Read the complete commentary to learn what Kevin wants to do from here. Furthermore, this portfolio actually had three of the top 5 winners. In addition to EDIT, Quidel (NASDAQ:QDEL, +8.4%) and Oncternal Therapeutics (ONCT, +8.2%) also made the list.

Black Box Trader: This week's adjustment replaced four names. The stocks that were sold included:

• Brinker Int'l (EAT, +6.9%)
• Target (NYSE:TGT)
• Tapestry (NYSE:TPR)

The new buys that replaced those names are:

• Louisiana-Pacific (NYSE:LPX)
• Syneos Health (NASDAQ:SYNH)
• Valvoline (NYSE:VVV)

Read the Black Box Trader’s Guide to learn more about this computer-driven service.

Technology Innovators: "The sell the news trade was not only here in TSLA, but in the stimulus package as well. The market was less than impressed by the bill that everyone expected to get done last week? so no real benefit here as it was priced in.

"The weaker open allowed buyers of the dip to come in and grab some "relative bargains" and as the day wore on the markets returned to the Mason Dixon line. What looked like a sellers day turned around and ended up being more neutral than anything.

"A week ago I added (AI) to the list even before it had a Zacks Rank. I see the stock up 50% in a week and of course I am wondering if we should take profits. Part of me believes this stock is headed to 200 and if that level, or something close to it is reached soon then I will take profits. Until then, I am holding this one."
-- Brian Bolan.

By the way, AI was the second best performer on Monday among all ZU names with a jump of 16.9%.

Until Next Time,
Jim Giaquinto

Recommendations from Zacks' Private Portfolios:

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Zacks Investment Research
New Strain Overshadows Stimulus Deal, but Stocks Recover

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New Strain Overshadows Stimulus Deal, but Stocks Recover

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