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The major indices were all in the red on Thursday, but they came well off the morning lows amid solid economic data released today and before the big monthly jobs report scheduled for tomorrow. A potential compromise on the corporate tax rate also helped the rebound.
The Dow’s five-day winning streak has come to an end, but it was still the best-performing index with a loss of only 0.07% (or about 23 points) to 34,577.04. It had been off by more than 250 points earlier in the session. The S&P also had a nice comeback and finished lower by 0.36% to 4192.85.
Unfortunately, the NASDAQ didn’t have quite as dramatic a bounce as tech lagged once again. The index slipped by 1.03% (or nearly 142 points) to 13,614.51.
Tomorrow’s Government Employment Situation report may be the biggest jobs report of the month… but it’s far from the only one. We had two other such releases on Thursday and they were both noteworthy.
The ADP employment report showed that private payrolls added an impressive 978,000 jobs in May, squashing expectations of less than 700K and the previous month’s downwardly-revised total of 654K. As you’d expect in an economy that’s finally reopening, the leisure & hospitality space is making up some lost ground by adding more than 400K jobs.
But there’s more. Jobless claims reached another pandemic milestone by moving under 400K at 385,000, which was slightly better than expectations and marked a fifth straight decline. Meanwhile, ISM Services jumped to 64 in May, which is far into expansion territory above 50. The print was better than April’s 62.7 and expectations at just over 63.
Ironically (but not surprisingly) these strong reports were probably a big factor in the market’s morning malaise. After tomorrow’s jobs report, the market’s obsession will switch to the next Fed meeting scheduled for June 15-16. These strong results provide even more fuel to nervous investors’ concerns that the Committee may have to change policy sooner than expected.
The market fortunately simmered down as the day progressed. And it got a big boost from a news report that the Biden Administration may offer a 15% tax floor instead of hiking the corporate tax rate to 28%. It’ll be interested to see where this goes in the coming weeks as Washington attempts to pass an infrastructure bill.
Well… here we go! The jobs report comes out tomorrow. We probably won’t have anything nearly as dramatic as last month’s miss of approximately 700K, but it does have the potential to be a market mover. As of this moment, the Dow is up slightly in this abbreviated week heading into Friday, while the other two major indices are in the red.
Today's Portfolio Highlights:
Home Run Investor: It’s time to get more exposure to the oil patch as crude prices continue to climb, so Brian added PDC Energy (NASDAQ:PDCE) on Thursday. This independent upstream operator explores for, develops and produces natural gas, crude oil and natural gas liquids. The company has beaten the Zacks Consensus Estimate in each of the last four quarters and amassed an average surprise of 79% in that time. Rising earnings estimates have made PDCE a Zacks Rank #1 (Strong Buy). Looking forward, analysts are calling for topline growth of 24% this year and 11% next year. In order to make room for PDCE, the editor decided to sell MarineMax (HZO) after a sharp pullback, which protects a 42% profit in less than seven months. Read the full write-up for more on all of today’s moves.
Counterstrike: Business is picking up for Ulta Beauty (NASDAQ:ULTA), which recently reported a 113% positive surprise and raised its fiscal 2021 guidance. The stock just filled its post-earnings gap today but Jeremy thinks it will hold support and continue its move upwards. This Zacks Rank #1 (Strong Buy) is an obvious reopening play, so the editor added it on Thursday with a small 4% allocation. If the selling continues but the support levels hold, he’ll add more of ULTA. Read the full write-up for the specifics on this move.
Headline Trader: The first quarter report from Goldman Sachs (NYSE:GS) was so “unbelievable” that Dan wasted no time and added this financial giant on the same day of its release. And why shouldn’t he? The company beat the Zacks Consensus Estimate by 90% and grew sales by nearly 160% year over year. That was back in mid April. Now, GS is nearing the editor’s Fibonacci-derived price target around $391 and the relative strength index has reached overbought territory. He thinks this is a great time to “scale out” of the stock, so half of the position was sold on Thursday for a more than 16% return in less than two months. Dan is leaving the other half in the portfolio as he still thinks GS has upside potential. Read more in the full write-up.
All the Best,
Jim Giaquinto
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