Stocks Cut Losses Amid Mixed Economic Data

Stocks couldn’t add onto yesterday’s gains in Thursday’s session, but they did manage to come well off their lows by the close and stay in positive territory for the week. Of course, there's still one more day to go. Meanwhile, today’s economic data (jobless claims, retail sales) was mixed.

The Dow plunged more than 270 points at its worst today, but significantly cut that deficit and declined only 63 points by the closing bell. It was down 0.18% to 34,751.32. The S&P also recovered from sharper losses and slipped by only 0.16% to 4473.75.

The NASDAQ took the same trajectory as its counterparts, but managed to come all the way back and finish with a slight gain of 0.13% (or about 20 points) to 15,181.92.

Stocks are coming back from their best session in the expectedly difficult month of September. The indices were all up by 0.5% or more on Wednesday, which snapped the NASDAQ’s five-day losing streak.

“This week we have formed a pattern in the S&P between the 21-day moving average and the 50-day moving average. The 21-day is getting sold, while the 50-day is being bought. Whichever gives in first, will likely give us our market direction over the short-term,” said Jeremy Mullin in Counterstrike.

“It’s really hard to make a determination of that direction right now. If I had to guess, the bulls will win out again and that 50-day will hold up once more.”

Today’s economic data was mixed. Let’s go with the good news first. Retail sales in August rose 0.7%, which marks a substantial improvement over July’s more than 1% plunge. Most importantly though, the result was better than expectations for a 0.7% loss, which shows that consumers are still spending money despite the delta variant.

However, jobless claims were underwhelming with the print coming in at 332,000 last week, which was about 12K more than expected. It was also higher than last week’s results, which means we've come off the pandemic-era low slightly.

Stocks have a good chance to rebound from last week’s sharp declines. However, tomorrow is one of those option expiration days, so we may see a spike in volume. Let’s hope for a solid end to the week…

Today's Portfolio Highlights:

Home Run Investor: The shipping space isn’t known for its consistency over the years, but these are different times with companies now being able to contract out big percentages of their fleets. Brian has a shipping winner in one of his other portfolios, so he decided to add some exposure over here as well by adding Euroseas Ltd. (NASDAQ:ESEA). The company operates in the dry cargo, drybulk and container shipping markets. It doesn’t have the greatest earnings history (as is normal for this space), but the most recent quarter included a positive surprise of 27%. The high demand has analysts raising their earnings estimates, which sent ESEA all the way to Zacks Rank #1 (Strong Buy) status. The editor also appreciates topline growth expectations of 71% for this year and another 40% for next, as well as its “dramatically” improving margins. Read the full write-up for more on today’s addition.

Surprise Trader: Sometimes Dave likes to “sprinkle in” the occasional Zacks Rank #3 (Hold), since stocks with lower expectations can potentially catch the market off guard and soar after a solid report. The editor sees such potential with Darden Restaurants (NYSE:DRI), which has an impressive record of beating the Zacks Consensus Estimate that stretches back years. The Olive Garden and LongHorn Steakhouse company topped expectations by 11.5% last time, and has a positive Earnings ESP of 1.69% for the quarter coming before the bell on Thursday, September 23. Dave added DRI with a 12.5% allocation on Thursday, while also selling Agilent Tech (NYSE:A) for more than 9% in just a little over a month. Learn more about today’s action in the complete commentary.

Technology Innovators: With trillions of dollars likely to be spent on infrastructure, Brian thinks that Bentley Systems (BSY) could be a “real sleeper” moving forward. This Zacks Rank #2 (Buy) provides software solutions to engineers, architects and the like for the design, construction and operation of infrastructure. The company has a great earnings history with positive surprises in each of the last four quarters and an average beat of 32% over that time. Being an Internet software name, the editor is most interested in its growth and margins rather than more traditional valuation metrics. BSY is expected to generate full-year growth of 20%, while operating margins have moved to 25% from 20% over the past three quarters. Read the full write-up for a lot more on this new addition.

Have a Good Evening,
Jim Giaquinto