The Senate passed its tax bill after the market closed on Friday, getting long-awaited tax reform one step closer to becoming a reality. The initial reaction from stocks this morning was positive, but a “sell the news” mentality took hold as the day progressed and the major indices finished well off their highs.
The Dow was still able to close at a fresh record with a gain of 0.24% (or about 58 points) to 24,290.1. However, at one point this morning, the index was up by more than 250 points. The S&P spent most of the session on the positive side, yet finished lower by 0.11% to 2639.4. Another big story right now is the ongoing flight from tech, which continued today with a 1.05% plunge in the NASDAQ to 6775.4.
This promises to be another busy week. The tax drama is not over yet, as the House and Senate versions need to be reconciled before making it to President Trump’s desk. Also, there's a heavy schedule of economic data all set for the first full week of December, which will end with the Government Employment Situation report on Friday. And we’ll also have to keep our eyes on Congress and its attempt to agree on a funding bill by Friday to avert a government shutdown.
In the portfolios, TAZR Trader and Counterstrike each bought Lam Research (NASDAQ:LRCX) to take advantage of this pullback in tech. Stocks Under $10 added today as well, while Black Box Trader cashed in a double-digit profit among its two swaps for this week’s adjustment. Learn about these moves and more in the highlights section below:
Today's Portfolio Highlights:
TAZR Trader: The profit-taking in technology has opened up some very attractive prices for strong companies. The editor saw an opportunity in old favorite Lam Research (LRCX), so he picked it up on Monday. The portfolio has been buying and swing trading this semiconductor company for a while, garnering positive returns of 13%+ in September and 18%+ in August. For its fiscal second quarter, the stock is expected to grow by 28% on the topline and 48% on the bottom…and is trading at 12X forward. Kevin says this is still one to own. Read more in the full write up.
Stocks Under $10: Someone once told Brian Bolan that a company does NOT hold an investor day to share bad news, so the editor is confident that Avid Technology (AVID) will have something good to say in its meeting tomorrow. This Zacks Rank #2 (Buy) company reported a positive earnings surprise of 33% in its most recent report, and Brian expects the company to build on that success. AVID also got some good news in other areas, such as a positive settlement with HLIT and a new agreement with Viacom. Read the complete commentary for all the specifics on this new addition.
Counterstrike: Money has been aggressively rotating out of tech for the last few days, which means some really good companies are now at bargain prices. Lam Research (LRCX) is one such company. This equipment supplier for semiconductor wafer processing reported a strong quarter recently with a positive earnings surprise and a raised guidance. Earnings estimates have been flying higher for LRCX, but that didn’t keep the share price from getting shellacked in this tech downturn. Jeremy sees multiple levels of support amid this unnecessary plunge and added the stock to the portfolio on Monday with a 5% allocation. He’ll add on any further weakness into support levels. Read more about this new buy in the full write-up.
Black Box Trader: The portfolio sold KB Home (KBH) as part of its adjustment this week and got a solid return of 17.8%. It also sold Fiat Chrysler (FCAU). The new additions that replaced these names are Leucadia National (NYSE:LUK) and Prudential Financial (NYSE:PRU). Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.
Zacks Confidential: Can the Dow actually reach 30,000 in the next 12-18 months? Dave Bartosiak thinks that it may very well happen, which is music to the ears of fellow bull Kevin Matras. Dave was given the keys to Zacks Confidential this week to explain such a bold scenario. Read about four good reasons why the index could be poised for 6,000 more points and three stocks that could help it get there: The Case for Dow 30,000.
Options Trader: "After the Senate passed their tax cut bill late Friday night/Saturday morning, this was the first chance traders had to react to the news, and they did so by sending stocks sharply higher in the morning.
"But both chambers still have to reconcile their differing bills into one for the President to sign. Most are optimistic that this will get done in short order. But nothing is done in DC until it’s done.
"However, traders likely became a bit cautious ahead of Friday’s (Dec. 8th) deadline for a spending bill to avoid a government shutdown. Leaders of both parties will meet with the President at the White House on Thursday. But that leaves little room for error. Hopefully, some compromise can be reached. Nobody, whichever side of the aisle you’re on, wants to see a shutdown, especially during the holidays." -- Kevin Matras
Until Tomorrow,
Jim Giaquinto
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