Stocks calmed down quite a bit from yesterday’s Fed minutes melee, leaving us with a mixed session on Thursday that saw a couple losing skids come to an end. However, all of the major indices go into Friday’s session with solid losses for the week.
The S&P managed to advance 0.13% today to 4405.80 and the NASDAQ rose 0.11% (or nearly 16 points) to 14,541.79, which ended losing streaks of two days and three days, respectively. Unfortunately, the Dow is now stuck in a three-day slump after slipping 0.19% (or about 66 points) to 34,894.12.
The market had an outburst yesterday in the wake of the Fed minutes for July, which suggested that members are growing more open to scaling back stimulus measures such as asset purchases. Investors would rather not hear about any tapering whatsoever, but are especially unnerved by the possibility of something happening this year.
As a result, the S&P and Dow both dropped more than 1% on Wednesday, while the NASDAQ was almost there with a slide of 0.9%. The indices each go into Friday’s session with losses of more than 1% over the past four days, leaving them in danger of losing ground for the full week.
“News on Wednesday that the Fed was considering tapering by the end of the year weighed on stocks then and this morning. But the markets were able to shrug that off by the end of the day,” said Kevin Matras in Options Trader. “The taper talk was not really much of a surprise since the Fed had been hinting at that for months.”
Apart from the minute-mania, we received more good news from jobless claims on Thursday. Last week’s number was down to 348,000, which was better than expectations of 365K and the previous week’s 375K. That’s a new pandemic-era low and another positive jobs number, which is one of the reasons why the Fed is beginning to think about tapering.
It’s been a week of retail earnings as the season winds down, and one of the market’s most energetic reactions to a report was good old Macy’s (M). Shares of the department store staple surged nearly 20% today after strong second quarter results, which included positive surprises on both the top and bottom lines as well as an increased guidance. Kohl’s (KSS) did pretty well after a strong report today too with a rise of over 7%.
Tomorrow will be rather tame on the earnings front, though we will get reports from Deere (NYSE:DE) and Foot Locker (NYSE:FL).
Today's Portfolio Highlights:
Blockchain Innovators: There’s an industry group called the 'Blockchain in Transport Alliance', which works to "develop standards and promote the effective use of the emerging technology”. One of its members is Daseke (NASDAQ:DSKE), the largest flatbed, specialized transportation and logistics solutions company in North America. DSKE is also today’s addition to the portfolio, as the membership gives it a blockchain connection and its rising earnings estimates give it a Zacks Rank #2 (Buy) status. EPS growth numbers are solid, while revenue growth “is a bit muted by still positive". Meanwhile, the editor also got out of GreenBox (GBOX) as this speculative name struggled ever since being added. The complete commentary has more on today’s moves.
Headline Trader: There was “nothing but great news” out of last night’s earnings for Synopsys (NASDAQ:SNPS), including a positive earnings surprise, a raised guidance and an encouraging long-term outlook as the economy continues to rapidly digitize. The stock was the second-best performer today among all ZU names with an increase of 8.7%. Dan decided to sell half of this global leader in semiconductor IP and EDA tools for a 25.5% return in less than three months. The company is the second best performer in the portfolio since being added. Meanwhile, the editor sees a technical signal that suggests increased probability of a downturn, so he decided to do a little hedging by adding the small triple-leveraged short NASDAQ 1000 (SQQQ). Read the full write-up for more on today’s action.
Home Run Investor: The shift in population is driving new home purchases, which is also increasing the demand for furniture. So Brian added Ethan Allen Interiors (NYSE:ETD) on Thursday, which is a leading interior design company and manufacturer and retailer of quality home furnishings. ETD has met the Zacks Consensus Estimate three times and matched once in the past four quarters, while rising earnings estimates for this year pushed the stock to a Zacks Rank #2 (Buy) status. The editor loves its low valuation, especially since it posted huge growth of 94% in the most recent quarter. Furthermore, operating margins have a seen a “dramatic improvement” over the past three quarters by moving to 8.8% from 4.1%. Read the full write-up for a lot more on this new addition.
Surprise Trader: For fourteen out of the past fifteen quarters, DICK’S Sporting Goods (DKS) has beaten the Zacks Consensus Estimate. Dave expects this impressive history to continue when this Zacks Rank #2 (Buy) reports again before the bell on Wednesday, August 25. It has a positive Earnings ESP heading into the release. The editor added DKS on Thursday with a 12.5% allocation, while also getting out of Avnet (NASDAQ:AVT). Learn more about today’s action in the full write-up.
TAZR Trader: Earlier this week, Kevin added ProShares UltraPro Short QQQ ETF (SQQQ) just in case there was an acceleration to the downside. And today he picked up even more. Read his complete commentary for all the specifics, along with the editor's analysis on the recent NVIDIA (NASDAQ:NVDA) earnings. The innovative graphics chipmaker is the service's best performer with a gain of over 96% since being added.
Value Investor: Energy was the best performing sector over the first six months of the year, but it’s obvious that the oil trade is breaking down again. Tracey is still bullish long-term on the space since we now have vaccines and expectations of strong GDP growth, but this “hated” space could still go much lower from here. Therefore, the editor sold Magnolia (MGY) on Friday for a 39.9% return in just under seven months. She also sold Diamondback (NASDAQ:FANG) for a loss. Tracey considers this a “temporary setback” for now and plans to get back into the space when this sell-off ends... but that could take several more weeks.
Zacks Top 10 Stocks: After over a year of being tucked away at home during a pandemic, a shopping trip to a department store may be just what’s needed as we try to get back to normal. Macy’s (M) certainly saw renewed interest in the second quarter, which led to a positive earnings surprise of more than 485%! Revenue also beat the Zacks Consensus Estimate by over 10%. M raised its guidance and reinstated the quarterly dividend as well. Shares jumped 19.6% on Thursday, which easily made this retail staple the best performing stock among all ZU names today.
All the Best,
Jim Giaquinto
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