Stocks Cut Losses, but Still Down for a Third Day

Stocks bounced back handily from this morning’s crypto crash, but the major indices still finished in the red for a third straight session on Wednesday. Nevertheless, a strong quarterly report from retail giant Target (NYSE:TGT) impressed even this stubborn market.

The NASDAQ plunged more than 1.5% at its worst point today during the cryptocurrency carnage, which saw Bitcoin plunge to around $30K for a 50% drop from recent highs. However, buyers didn’t stay on the sidelines and eventually bought the dips for both Bitcoin and tech.

The index ended lower by only 0.03% (or just under 4 points) to 13,299.74 for its best performance of the week so far. The other indices went on a similar ride. The Dow plunged by nearly 600 points earlier, but cut that loss in the end to only 0.48% (or about 164 points) to 33,896.04. The S&P slipped 0.29% to 4115.68.

It was a nice and very welcomed rebound from a difficult morning, but the indices still haven’t seen any green this week. Fears of rising inflation continue to permeate throughout the market, and the release of April’s Fed minutes are unlikely to change that.

Powell & Friends reiterated that the economy remains far from the Committee’s employment and inflation goals, though they may want to begin discussing an adjustment to the pace of asset purchases if the economy continues to improve rapidly. Of course, these minutes came from before the recent jobs and CPI reports.

You might have heard millions of investors scream out “I told you so!” when reading that second part, since they’ve long been dubious of the Fed’s statements that rates would stay super low for a super long time. Fortunately, they didn’t hamper the market’s rebound.

Plus, there were other things to focus on, such as Target’s (TGT) fiscal first quarter results. You know a company has really hit it out of the park when it can jump more than 6% on a down day and during such a stubborn earnings season that doesn’t often reward strong performances.

The retailer beat the Zacks Consensus Estimate by more than 63%, while sales jumped 23% year over year. TGT has been a model of adapting to digital retailing during this pandemic, and offered a second-quarter forecast that was ahead of expectations.

This encouraging performance following strong results from the likes of Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Macy’s (M) yesterday, which shows that the retailers are benefiting from the stimulus checks and the economic reopening.

Today's Portfolio Highlights:

Home Run Investor: The market isn’t covering Rada Electronic Industries (RADA) very extensively right now, but Brian has noticed its expected revenue growth moving forward. This Zacks Rank #2 (Buy) is an Israel-based company involved in the military and commercial aerospace industries, which means this addition is also a topical name given the increased violence in the Middle East. There’s only one broker covering the stock right now, but it is increasing estimates on the company after a positive surprise of 33% in the most recent quarter. The editor really appreciates revenue growth expectations of 230% for this year and 47% for next. Plus, margins have been improving over the past three quarters. Brian added RADA today, while also cutting Verra Mobility (NASDAQ:VRRM) for an 11.3% return in four months after slipping to a Zacks Rank #4 (Sell). Read the full write-up for more.

Counterstrike: Just because your cautious doesn’t mean your sedentary. The S&P came into its 50-day again on Wednesday, so Jeremy thought this was a good time to make some moves. The editor finally added some Grayscale Bitcoin Trust (GBTC) as Bitcoin crashed this morning. With a 4% allocation, the portfolio will now have some exposure for the next upleg. He’ll add more on any dips. Meanwhile, Shopify (NYSE:SHOP) bucked the trend today and rallied after announcing a partnership with Google (NASDAQ:GOOGL), so Jeremy picked up the stock with a 10% allocation. He also added 4% to the Facebook (NASDAQ:FB) position, which was originally added last Thursday. Read the full write-up for more on all of today’s moves.

Surprise Trader: The manufacturing – material handling space is in the top 1% of the Zacks Industry Rank! And that’s where Dave went for today’s addition of Columbus McKinnon (CMCO). This Zacks Rank #2 (Buy) is a broad-line designer, manufacturer and supplier of sophisticated material handing products and integrated material handling solutions. The company has beaten the Zacks Consensus Estimate for five straight quarters now, and the editor doesn’t expect that will end when it reports again before the bell next Wednesday, May 26. CMCO has a positive Earnings ESP of 8.51% for the upcoming release and beat by more than 73% last time. The service added CMCO on Wednesday with a 12.5% allocation, while also getting out of Energizer (ENR). Read the full write-up for more on today’s action.

Stocks Under $10: "When I add this all up, a risk off trade today where the dip buyers stepped in and rallied stocks back to a respectable close. Then you have the idea of Crypto falling and Gold rising – which to me suggests there is a ton of cash on the sidelines.

"All that cash will be ready and waiting for a nice pull back ... and when all the pull backs get bought the risk of a crash goes down significantly. One investor told me that when demand is high for gold, stocks better watch out. And I agree, pull backs can happen and they are healthy... but my view point is that there is not going to be a crash with all that cash waiting for better prices." -- Brian Bolan, who easily had the best performer among all ZU names today as Freightcar America (NASDAQ:RAIL) jumped 13.5%.

All the Best,
Jim Giaquinto