The market’s three-week winning streak is all over after yesterday’s epic plunge, but stocks regrouped on Friday and managed to get back some of those hefty losses.
It was a volatile session that saw the Dow soar by more than 800 points early before giving it all back. However, it finished with a rise of 1.9% (or about 477 points) to 25,605.54. The index lost more than 1860 points on Thursday.
Money flowed back into ‘reopening names’ like airlines, financials and cruise companies despite recent concerns that the recovery may not be as vibrant as hoped.
The S&P was up 1.31% to 3041.31 and the NASDAQ rose 1.01% (or about 96 points) to 9588.81. Both of these indices dropped more than 5% yesterday.
For the week, the Dow was off about 5.5%, while the S&P dipped 4.7% and the NASDAQ slipped 2.3%. While that’s a pretty rough performance, the indices actually gained more last week when optimism peaked.
Stocks had a great start to June as investors felt pretty confident about the economy recovering and started showing some love to beaten-down areas that would benefit most from the reopenings.
We even got a sharply better-than-expected government employment situation report last Friday.
However, rising coronavirus cases in some areas and a less-than-enthusiastic outlook from Fed Chair Jerome Powell suggested to investors that this optimism had gone too far and the market was overheated.
The result was a March-like pullback on Thursday.
So now what?
Was the recent downturn enough to placate this nervous market for now, or will we have more sessions like Thursday in the days to come? It will probably depend on the headlines.
Speaking of headlines, Mr. Powell will have a chance to make a few as the Chair is scheduled to talk three times next week.
And while coronavirus cases may continue to rise, the market is unlikely to have as violent a reaction as before unless it dramatically stunts the reopening momentum around the country.
Today's Portfolio Highlights:
Insider Trader: Buying into a massive sell-off is “crazy” bullish, according to Tracey. And that’s exactly what she noticed insiders doing at Allegiant Travel (ALGT), a domestic US airline that flies from smaller, secondary cities. A director bought 1000 shares yesterday… the same day that the Dow plunged 7% because economically-sensitive stocks – like airlines – got bludgeoned. Also, earlier in the month, the President bought 5,000 shares. Traffic for airlines is still just a fraction of what it was before the coronavirus, but it has shown signs of improving lately. The editor is wondering what these insiders know that we don’t, and she’s willing to take a chance by adding ALGT with a 10% allocation. Learn a lot more about this new addition in the complete commentary. By the way, this portfolio had the best performer of the day with Royal Caribbean (NYSE:RCL) jumping 12.2%.
Surprise Trader: The portfolio put off selling a position yesterday when the market was plunging, but came back on Friday with three deletions. Two of them brought double-digit returns. Dave sold CURO Group Holdings (CURO) for a 42.7% profit in about six weeks and CAE (NYSE:CAE) for a 30.4% return in three weeks. He also got out of Guess (NYSE:GES) with a slight loss.
Counterstrike: "Its hard to pinpoint exactly what has been going on the last couple days. But the COVID headlines are coming back and that’s creating some fear. I am not concerned as I don’t believe we will see another round of shutdowns.
"New case percentages are something I am ignoring as they can be very misleading. With more testing, of course we will see more cases. If you are following the numbers, available beds and deaths should be the focus. As long as hospitals are not overwhelmed, we wont shutdown again and that is key. As long as economies continue to reopen the market should avoid a March like panic.
"Next week will be very interesting. I view the 3000 level as the line in the sand for a bull/bear fight. I expect a tug of war like trading week surrounding S&P 3000. I will be looking to add a few stocks next week now that we have a pullback to buy into. While I still want to remain patient, there are certain stocks that I have my eye on so expect some trades on any market weakness." -- Jeremy Mullin
Have a Great Weekend!
Jim Giaquinto
Recommendations from Zacks' Private Portfolios:
Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>
Zacks Investment Research