Stocks were in the green for October heading into this final week, but these past few days of sharp selloffs amid a number of uncertainties led the market to its second consecutive monthly decline.
The NASDAQ bore the brunt of today’s pullback by plunging 2.45% (or 274 points) to 10,911.59. It was off more than 5% this week.
The four FAANGs that reported last night all beat expectations, but there were a few soft spots. And this nervous market is NOT in the mood for soft spots right now.
Facebook (FB) dropped by 6.3% due to a dip in users during the quarter, while Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) dipped more than 5% each. Even Netflix (NASDAQ:NFLX), which didn’t report this week, slipped over 5%.
But just like the afterhours trade last night, Alphabet (NASDAQ:GOOGL) (GOOG) outperformed its counterparts and rose 3.4%.
Elsewhere, the S&P dropped 1.21% to 3269.96, while the Dow dipped 0.59% (or about 157 points) to 26,501.60. These indices declined over 5% and over 6% this week, respectively.
That makes two consecutive months of losses after soaring in the previous five months during the greatest comeback in market history.
The main problem this week was the rise in coronavirus cases and, consequently, the possibility for more lockdowns to come. Europe has already started, and the U.S. might not be far behind.
Another kick in the gut was that the possibility for a new stimulus deal pretty much ended this week. For most investors, hopes for such an agreement were dashed weeks ago.
So now we have more cases and more potential lockdowns, but without more help from Washington. Great job!
But let’s not forget that there was some good news this week. Earnings season has been solid thus far, despite the market’s sour reaction to the recent FAANG reports.
And just yesterday we received an historic GDP report for the third quarter that jumped 33.1%, along with a second week of better-than-expected jobless claims numbers.
But all the good stuff has to take a backseat right now as we grapple with a number of uncertainties. A big one should be resolved next week with the election, but that’s far from the only question mark right now.
Today's Portfolio Highlights:
Insider Trader: Despite several “outstanding” reports this earnings season, the market has decided “it’s over the hot housing story”. Well, Tracey isn’t over it. A strong earnings report and a decline in shares have created a buying opportunity for PulteGroup (NYSE:PHM), which is one of the largest homebuilders in the country. Rising earnings estimates have made this stock a Zacks Rank #1 (Strong Buy). But most importantly for this portfolio, the General Counsel recently bought 5,000 shares. The editor always pays attention when the GC of a company buys shares because that position is usually more conservative than the rest. Therefore, she added PHM on Friday with a 10% allocation, while also selling Wabtec (WAB). Read the complete commentary for more.
Stocks Under $10: The plan for this portfolio during difficult markets is to stay invested and weather the storms, while limiting exposure from time to time. Brian has limited A LOT of exposure of late, so he added two new names on Friday. One of the buys was Commercial Vehicle Group (NASDAQ:CVGI), a trucking name that has beaten the Zacks Consensus Estimate in the past two quarters. Rising earnings estimates have made it a Zacks Rank #2 (Buy). Next year is looking to be positive for CVGI with topline growth of more than 20%. The other buy is Interface (NASDAQ:TILE), a commercial flooring name that will bring some diversification to the portfolio. It topped earnings expectations in each of the last four quarters and enjoys a “great” valuation. Get more specifics about both of these moves in the complete commentary.
Large-Cap Trader: The housing industry is strong right now, so it’s no surprise that Mohawk Industries (NYSE:MHK) just reported solid third-quarter results. The company is a global manufacturer of flooring products, which are materials no home can do without. MHK reported earnings and sales that beat Zacks Consensus Estimates by 41.1% and 2.9%, respectively. Despite another dreary session for the market, the stock jumped 10.9% on Friday and became the best performer of the day among all ZU names. John added MHK on Wednesday, and it’s already up more than 9.1% in the portfolio.
Have a Great Weekend!
Jim Giaquinto
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