Rally Stumbles, but Stocks Stay Positive for Another Week

If the market finishes positive for the week despite a three-day losing streak… then we should consider it a success. Even if those “gains” are mighty hard to see.

These five days looked like they would be bookended with a couple real nice rallies. However, the final hour or so of Friday’s session left the indices hanging onto the green by their fingernails.

In the end, the NASDAQ advanced 0.8% for the week, while the S&P was up 0.2% and the Dow advanced 0.07%.

In more normal circumstances, those final two performances would be considered “breakeven”. But, hey, we’re in a pandemic! We need to take good news wherever we can find it.

And we did get some good news this morning when U.S. retail sales blew past expectations to advance 1.9% in September. The consumer makes up the bulk of this economy, so such a report is a great relief to a market that’s still waiting for more stimulus. It’s also a nice counterpoint to yesterday’s disappointing jobless claims number.

Stocks appropriately rose on the news and stayed there most of the day. But the last hour ruined it as tech sold off and options expiration wreaked havoc.

The Dow finished higher by 0.39% (or around 112 points) to 28,606.31.

Remember how big a story Boeing (NYSE:BA) was back in the day? Well, the airplane maker rose 1.9% on Friday after European regulators said the beleaguered 737 Max was now safe.

And Pfizer (NYSE:PFE) advanced 3.8% after the drugmaker plans to pass safety milestones for its vaccine candidate as soon as next month.

The other indices had a tougher time. The S&P stayed in the green, but only by 0.01%. In other words, it advanced less than half a point to 3483.81. Nevertheless, this index and the Dow snapped three-day losing streaks.

The NASDAQ, though, has a four-day skid now as it slipped 0.36% (or about 42 points) to 11671.56.

That makes four weeks of gains for the NASDAQ, and three weeks for the Dow and S&P.

Who knows what – if anything – will happen with the stimulus next week. But we do know that earnings season will heat up with about 520 companies reporting. Some of the big reports in the coming days include IBM (NYSE:IBM) on Monday, Netflix (NASDAQ:NFLX) on Tuesday, Tesla (NASDAQ:TSLA) on Wednesday and Intel (NASDAQ:INTC) on Thursday.

Today's Portfolio Highlights:

Value Investor: The home furnishings space is hot right now, which means most names are pretty expensive. But Tracey found one that will help this portfolio benefit from the multi-year housing boom at a reasonable price. Herman Miller (NASDAQ:MLHR) is known for office furniture, but it’s much more than that these days after buying upscale furniture brand Design Within Reach and the Danish lower price point retailer HAY. In its fiscal first quarter, retail was up 40% with the home office category understandably soaring by 300%. Also, web sales were up 248%. Of course, office sales are still down, but this pandemic won’t last forever. Unlike many home furnishings companies right now, MLHR is still cheap. It also recently reinstated its dividend and has plenty of liquidity. Read the full write-up for a lot more on this new addition.

Surprise Trader: This first week of earnings season ends with the addition of Altra Industrial Motion (NASDAQ:AIMC), a Zacks Rank #2 (Buy) manufacturer and distributor of motion control, electromechanical power transmission and automation products. The company has an Earnings ESP of 2.04% for the quarter scheduled before the bell on Friday, October 23. It is coming off two quarters of double-digit earnings surprises. Dave added AIMC on Friday with a 12.5% allocation, while also selling Commercial Metals (CMC) for 1.3% in 10 days. Read the full write-up for more on these moves.

Technology Innovators: Shares of Advanced Energy Industries (NASDAQ:AEIS) began moving higher after reporting a beat-and-raise quarter back in early August. However, the stock got caught up in the downdraft of that SoftBank situation. Now the stock is charging back, and Brian wants to be a part of the move. This Zacks Rank #2 (Buy) is a power technology company that supplies power subsystems and process-control technologies to the semiconductor industry. AEIS has a great earnings history, which includes an average surprise of 39% over the past four quarters. The editor also likes its valuation for a chip name. He added AEIS on Friday. See the complete commentary for more on this addition.

Blockchain Innovators: A highly-ranked company from a strong industry that actively seeks out new technology? That’s pretty much the perfect candidate for this portfolio! And that’s what Dave added today with Cowen Group (NASDAQ:COWN), a Zacks Rank #1 (Strong Buy) from the Financial – Investment Bank space (top 12% of the Zacks Industry Rank). COWN loves to invest in emerging technologies, such as bitcoin and other cryptocurrencies. In addition to this new buy, the editor also sold the idling PFSweb (NASDAQ:PFSW) for a 5.1% return in about four months. The complete commentary has more on today’s action. In other news, this portfolio had a top performer on Friday as iClick Interactive Asia Group (ICLK) rose 4.7%.

Insider Trader: One of the biggest stories among all ZU portfolios of late has been the epic turnaround of Bed Bath & Beyond (NASDAQ:BBBY). In fact, this specialty retailer of domestic merchandise and home furnishings is currently the best-performing stock among all Zacks services over the past 30 days with a surge of 93.6%. Well, Tracey doesn’t want to get too greedy... or leave any money on the table. Therefore, the editor sold half of BBBY on Friday for a an approximately 170% return in just under three months. The stock has been getting a lot of attention from places like CNBC recently, which might be a signal that it’s ready to take a break. However, Tracey wants to hold onto some of this winner for its Investor Day on October 28 because it might provide another upside catalyst.

Have a Great Weekend!
Jim Giaquinto