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Quiet Reaction to Stimulus Deal, Though NASDAQ Hits New High

Published 12/22/2020, 09:15 PM
Updated 07/09/2023, 06:31 AM
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After months of waiting for a stimulus package, the market didn’t seem too excited on Tuesday when Congress finally passed one. Stocks were again mixed with the S&P falling for a third straight session.

Remember just a few weeks ago when a simple optimistic word from someone involved in the talks would send the market sharply higher? Well, that was then and this is now.

Investors knew that the likelihood of a deal increased as we got closer to the holidays and the possibility of a government shutdown.

In other words, this bill was priced in a while ago. As stated yesterday, it would have been more surprising if Capitol Hill continued to dawdle and accomplished nothing while the economic recovery continued to slow.

Nevertheless, the NASDAQ still managed a new record by advancing 0.51% (or about 65 points) to 12,807.92. However, that was the only major index on the plus side.

The Dow dropped 0.67% (or around 200 points) to 30,015.51 and the S&P dipped 0.21% to 3687.26.

The $900 billion stimulus deal will include another round of checks directly to individuals and will fund the Paycheck Protection Program for small businesses. There will be other provisions as well.

Congress also funded the government through September.

Regardless of the market’s rather lackluster reaction, it’s a real good thing that this agreement was finally accomplished. The coronavirus is still everywhere around the globe and we’re months away from the vaccines making a significant impact.

And let’s not forget this new, more contagious strain of covid recently discovered in the U.K. that has probably already entered the U.S. The market certainly hasn’t forgotten, but is taking some solace in the belief that the vaccines should be able to handle this variant.

So we’re more than halfway done with this short week already. As expected, volume is thinner than normal with Christmas on the horizon. Let’s see if we can rally into the holiday…

Today's Portfolio Highlights:

Stocks Under $10: The electric vehicle market is “really catching fire” right now... and Tesla (NASDAQ:TSLA) is far from the only way to play this hot industry. On Tuesday, Brian added American Axle (NYSE:AXL) & Manufacturing (AXL), a leading supplier of driveline and drivetrain systems modules and components for the light vehicle market. Its Electric Drive Technology powers Jaguar’s first pure-electric model, the I-Pace. AXL is a Zacks Rank #2 (Buy) with an “outstanding” earnings history that includes positive surprises in each of the last four quarters. It also has a “crazy low” valuation. Meanwhile, the editor sold Commercial Vehicle Group (NASDAQ:CVGI) today for a 41.7% return in less than two months, as the trucking name’s chart appears to be weakening. Read the full write-up for more on today’s action and some news on possibly increasing the portfolio to 20 names.

Technology Innovators: Whenever someone considers “cutting the cord”, one of the big questions is: “where am I going to get my sports?”. Well, FuboTV (FUBO) could be the solution. The company is a sports streaming service that allows users to watch live sports and TV without cable. It doesn’t have much of an earnings history or valuation, but the editor is making a play in a nascent space that he believes is “just starting to run”. He thinks this stock could easily trade over $60 in the coming days. The portfolio added FUBO on Tuesday and sold Progress Software (NASDAQ:PRGS) for a nice 21.4% return in under five months. Read the complete commentary for more on today’s moves. By the way, C3.ai (AI) was a top performer on Tuesday with a gain of 10.3%.

Zacks Short Sell List: The portfolio changed two positions this week by short-covering ConocoPhillips (NYSE:COP, +1.8%) and Alteryx (NYSE:AYX), and then replacing those names by adding SolarEdge Technologies (NASDAQ:SEDG) and Netflix (NASDAQ:NFLX). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

Insider Trader: "Surprisingly, the stock market didn't get much of a boost from the package finally passing. Basically, it was already priced into the market.

"But the NASDAQ and the Russell 2000 still both managed to close at new all-time highs today as their momentum continued.

"The market is looking forward by 3 to 6 months. It sees the vaccine rollout having been completed and herd immunity in place by the summer, with a reopening of the global economy to follow.

"But what if it doesn't go so smoothly? That's one of the risks investors will be weighing as we head into 2021."
-- Tracey Ryniec

All the Best,
Jim Giaquinto

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