The news that Michael Flynn will be cooperating with Robert Mueller’s Russian probe ruined a perfectly good morning on Friday. The major indices were modestly higher early in the session, but then took a severe plunge when the headline broke. However, it didn’t ruin the week. The major indices came well off their lows throughout the rest of the day on optimism that the Senate would be able to pass its tax bill. Eventually, two of the major indices finished the week with strong gains.
So how bad was the plunge after the Flynn news? At one point, the Dow was below 24000 on Friday after starting the session nearly 300 points above that mark. When all was said and done, the index made a ferocious comeback and finished lower by only 0.17% to 24,231.6. In fact, the Dow just completed its best week of the year with a surge of 2.9% over the past five days.
The S&P ended just 0.2% below breakeven to 2642.2, marking a weekly advance of 1.5%. The NASDAQ declined 0.38% on the day to 6847.6 for a weekly loss of about 0.6%, but most that deficit can be blamed on Wednesday's sharp pullback for tech.
In the end, the market decided to focus more on the Senate tax cut bill than the Russian investigation. No one knows what will come of this Flynn news (or the entire probe for that matter); the tax issue is much more immediate and important to sustaining the market’s rally.
In the portfolios, Counterstrike made several moves, including cashing in a double-digit winner, adding a new position and shorting another. Jeremy also bought a protection play just in case the political atmosphere grows even more uncertain. Home Run Investor added a stock from an industry that’s in the top 1% of the Zacks Industry Rank. Learn more in the highlights section below:
Today's Portfolio Highlights:
Counterstrike: It was a busy session for the portfolio as Jeremy made good on his promise of new additions. But first, the editor cleared up some cash by selling Wynn Resorts (WYNN) for a 23.3% return. Solid gaming numbers from Macau set up a great price to get out. The portfolio’s new positions are:
• ProShares Ultra VIX Short-Term Futures ETF (UVXY): Here’s a protection play following this morning’s news that Michael Flynn will be testifying in the Russian probe. If nothing comes of this news, it’s no problem to just exit this insurance policy…but its good to have if uncertainty continues to spike.
• Ralph Lauren Corp. (NYSE:RL): With money flowing back into retail this week, Jeremy added a 9% position in this popular apparel giant in anticipation of a potential breakout that might lift the stock to $100 by early next year. Shares dipped following a positive earnings surprise, but are now nearing post-earnings highs.
• Cars.com (CARS): This online automotive platform is a Zacks Rank #5 (Strong Sell) that has been experiencing selling pressure since October. Yet shares have inched higher of late. Jeremy doesn’t think this will hold for long, so he short sold CARS with an 11% allocation and a plan to cover at around $19.
Read the full write-up for more specifics on all of today’s moves.
Home Run Investor: The RV industry is very solid right now, as evidenced by being in the top 1% of the Zacks Industry Rank with the second spot out of 256. One of the major players in this space is Winnebago (WGO)…and Brian Bolan is done waiting for a pullback. He added the company to the portfolio on Friday. WGO has beaten Zacks Consensus Estimates for earnings for eight straight quarters now, amassing an average surprise of 36% over the past four. The editor is expecting a solid move higher from here as it gets closer to the next quarterly report on December 20. Read the full write-up for more on this new pick.
Have a Great Weekend,
Jim Giaquinto
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