Stocks continued to rise and set new records on the penultimate session of August 2021, leaving the major indices with solid gains for the month heading into the final session.
After the weekend, investors are still happy with Fed Chair Jerome Powell’s comments at the virtual Jackson Hole meeting on Friday. Basically, some tapering of the monthly bond purchases may begin before the end of the year given the strong rebound from the pandemic, but an interest rate hike is far from imminent.
The NASDAQ continued to lead the way higher with a jump of 0.90% (or about 136 points) to 15,265.89. It was an especially solid session for the FAANGs, as Apple (NASDAQ:AAPL) rose over 3% while Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) each advanced nearly 2.2%. Netflix (NASDAQ:NFLX) was up 1.3%, while Microsoft (NASDAQ:MSFT) joined the fun with a similar increase.
The S&P rose 0.43% to 4528.79. This index and the NASDAQ each closed at record highs for a second consecutive session on Monday. They’ve both hit record highs numerous times in August. The Dow was left out in the cold today by declining 0.16% (or nearly 56 points) to 35,399.84.
All of these indices, though, are set for strong monthly performances. The NASDAQ is up approximately 4% for August with one day left, while the S&P advanced 3%. Even the Dow is up 1.3% so far this month.
It’s going to be a very busy, but perhaps quiet week ahead. We’re at the turn of the month, so there’s plenty of economic reports coming out in the next few days, culminating with the all-important Government Employment Situation report on Friday. Investors will be paying even closer than normal attention to this number since it could provide the Fed with the final straw to begin scaling back the asset purchases.
But on the other hand, we’re coming up on the Labor Day weekend. The market is closed next Monday, so a lot of investors will probably be cutting this week short and keeping the volume rather low.
Today's Portfolio Highlights:
Value Investor: Sometimes in the initial rollout stage of a new medical treatment, the company’s value fundamentals remain elevated while revenue jumps. That’s the situation with Vericel (NASDAQ:VCEL), a medical products company that markets MACI for treatment of cartilage defects in the knee and Epicel for burns. Strong business momentum for those products led to second-quarter total revenue soaring 97% year over year. VCEL also raised its full-year guidance to between $168 million and $171 million, instead of $165 - $168 million. Revenue is expected to rise 36% in 2021 and 27% in 2022, while earnings should also advance. Shares plunged 25% in June, which Tracey thinks was a buying opportunity. So she added VCEL on Monday with a price target of $68 and will buy more if it dips back into the $40s. Read the full write-up for all the specifics on this new addition.
Headline Trader: The low volume, growth-oriented rally on Monday has Dan looking to gain some exposure to an unloved recovery sector, while also bulking up the portfolio’s protection. First of all, energy stocks have caught a wave in the past week after paddling for years, and the editor thinks that Chevron (NYSE:CVX) is the best way to capitalize. The company is well-positioned to harness unprecedented pent-up oil demand as the world economies eventually reopen. Plus, CVX has “all the makings of a long-term winner” with a 5.5% dividend yield that’s “almost as safe as a US Treasury Note”. Meanwhile, Dan also added to ProShares UltraPro Short QQQ (SQQQ), which may be down now but should rebound as the NASDAQ 100 becomes increasingly overbought. Finally, the service sold the rest of Synopsys (NASDAQ:SNPS) for 32.4% in a little over three months as shares reached the editor’s price target. Read the complete commentary for a lot more on these moves.
Income Investor: It’s a bit crowded in the portfolio these days, so Maddy decided to take some profits off the table on Monday. The big winner was Lockheed Martin (NYSE:LMT), which remains a very reliable dividend stock. However, shares are down more than 8% over the past year while the S&P has soared by about 30%. Plus, it’s been in the portfolio since February 2014. The editor thought this was a good time to cash in LMT for a nice 150.9% return. She also sold Automatic Data Processing (NASDAQ:ADP) for 37.7% in about a year-and-a-half and Whirlpool (NYSE:WHR) for 22.9% in just under a year. ADP’s annual yield has fallen, while WHR is in a tough spot with all the inflation unknowns. The complete write-up has additional info on these sells.
Surprise Trader: Dave needs a new pair of shoes, so the editor picked up Designer Brands (NYSE:DBI) for the portfolio on Monday. It’s the parent company of DSW and is part of the highly-ranked Retail – Apparel and Shoes industry (Top 15%), which is an area that has really worked for the service this earnings season. DBI enjoys a solid Earnings ESP of 23.94% for the quarter coming before the bell tomorrow. This Zacks Rank #2 (Buy) topped the Zacks Consensus Estimate for the past three quarters, including a positive surprise of 150% last quarter. Dave added DBI on Monday with a 12.5% allocation, while also getting out of Brinker (EAT). Read the full write-up for more.
TAZR Trader: Henry Ford would be flabbergasted that a tiny microchip could impact the production of his most popular vehicle. But that's the difference between 1908 (when the Model T was released) and 2021. The global shortage of semiconductor chips has forced the mighty Ford (F) to cut its F-150 pickup truck production. But Kevin thinks the real opportunity for this automaker is its upcoming EV F150 Lightning, which should come out ahead of Tesla’s Cybertruck and the new Rivian. Therefore, the editor thinks that picking up F around $13 is a great idea. Read more about this addition in the full commentary.
Black Box Trader: The portfolio swapped out three positions in this week's adjustment. The stocks that were sold today included:
• Vertiv Holdings (NYSE:VRT, +4.6%)
• Skechers U.S.A. (SKX, +0.4%)
• Interpublic Group (IPG)
The new buys that filled these spots were:
• Capri Holdings (NYSE:CPRI)
• CBRE Group (NYSE:CBRE)
• DICK'S Sporting Goods (DKS)
Read the Black Box Trader’s Guide to learn more about this computer-driven service. By the way, this portfolio had a top performer on Monday as Option Care Health (NASDAQ:OPCH) climbed 4.9%.
Options Trader: "Of course, news that the Fed would be tapering sooner rather than later was no secret. They had been hinting at it for months. So Friday’s revelation was hardly a revelation at all. But it struck the right tone as inflation continues to rise and traders have become anxious as to when the Fed would do something about it.
"With the Fed now looking to act, that has calmed some fears that inflation was being left unchecked.
"But with interest rates still likely to stay near zero for the foreseeable future (rest of 2021, all of 2022, and a portion of 2023), the Fed has signaled that they will still do everything they can to support the economy as well." -- Kevin Matras
Until Tomorrow,
Jim Giaquinto
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