Stocks Rise for the Week as Jobs Report Threads the Needle

The monthly jobs report was pretty much perfect as far as nervous investors are concerned, which sent stocks solidly higher on Friday and gave the major indices a positive weekly performance.

Let’s get right to the big news. The Government Employment Situation report for May showed the economy adding 559,000 jobs, marking a substantial improvement over the previous month’s 266K (which infamously missed expectations of more than 1 million). However, the result fell well short of expectations around 650K – 670K.

Investors loved BOTH sides of the report.

The sharp month-over-month improvement combined with the negative surprise meant that the report threaded the needle. The economy is hot and continues to rebound from the pandemic, but it’s not so hot that the Fed would accelerate plans for tapering or some other policy change. It’s no wonder everybody is calling it a ‘goldilocks’ report.

“While at first glance the number seems bad, this is good for stocks as the data tells us we really aren’t that close to tapering,” said Jeremy Mullin in Counterstrike. “(T)he Fed will eventually have to attack this momentum. However, in the short-term the Fed can relax and see what the summer months bring.”

The tech space was most enamored with the report, as evidenced by the NASDAQ soaring 1.47% (or just under 200 points) to 13,814.49. The index now has a three-week winning streak after advancing 0.5% over these four days.

The S&P advanced 0.88% to 4229.89, while the Dow was up 0.52% (or about 180 points) to 34,756.39. These indices were up 0.6% and 0.7%, respectively, for this truncated week and may be making new all-time highs very soon.

Today's Portfolio Highlights:

Insider Trader: We’re finally seeing some activity from the insiders, which means business is picking up in this portfolio as well. On Friday, Tracey added the following three names:

• Dollar Tree (NASDAQ:DLTR) – two directors bought so far this month
• Monro Muffler (NASDAQ:MNRO) – new CEO made a “confidence buy”
• Norfolk Southern (NYSE:NSC) – a director made a large buy on June 1

But that’s not all. The editor needed to sell a few names to make room for these buys, which included cashing in two double-digit gains. She sold half of UnitedHealth (NYSE:UNH) and Fastenal (NASDAQ:FAST) each for profits of 21.7% and 12.9%, respectively. Both of these names were added in mid-February. The portfolio also sold all of the underperforming Chipotle (NYSE:CMG) and Weyerhaeuser (NYSE:WY) positions.

Tracey will take the cash from these sells and split it between the three new buys. The allocations should come somewhere between 8% and 10% each. Make sure to read the complete commentary for more specifics on all of these moves.

Blockchain Innovators: Growth is the name of the game at Perion Network (NASDAQ:PERI), a Zacks Rank #2 (Buy) global technology company that delivers online advertising solutions and search monetization to brands and publishers. It has beaten the Zacks Consensus Estimate for ten straight quarters now and is expected to generate earnings growth of 22% this year with sales growth of 20%. Next year is looking good too with growth expectations of 18.6% and 67%, respectively. PERI uses blockchain in several ways, including monetization and security. Dave added PERI on Friday, while also “voting a bad boy off the island” by selling his frustrating Brightcove (BCOV) position for 5.4% in about seven months. Read the full write-up for more.

Technology Innovators: It’s finally time to say goodbye to Calix (NYSE:CALX), a cloud play that was added nearly a year ago. The stock brought an outstanding return of 198.4% in that time. The new buy is Diodes (NASDAQ:DIOD), a leading manufacturer and supplier of high-quality discrete and analog semiconductor products. The company has beaten in each of the last four quarters, but the most recent surprise of 19% was the biggest and suggests more good times ahead. Rising earnings estimates have made this chip play a Zacks Rank #1 (Strong Buy) and its valuation is very appealing for a company that just reported year over year growth of 47%. Read the full write-up for more on today’s moves. In other news, this portfolio had two of the best performers among all ZU names on Friday, including a double-digit gain of 11.3% for Clearfield (NASDAQ:CLFD). The other noteworthy performance came from Criteo (CRTO, +6%).

Stocks Under $10: The ‘goldilocks’ jobs report not only sent the market higher on Friday, but also gave gold a boost. As a result, Comstock Mining (LODE) was the best performer among all ZU names with a gain of 15.3%. Brian added this gold miner late last month as earnings estimates “radically” jumped in the wake of a strong quarterly report, which included a positive earnings surprise of 150%. The stock is now up 12.9% in the portfolio since being added just a little over a week ago. By the way, Cassava Sciences (NASDAQ:SAVA) is one of the biggest movers over the past 30 days with a surge of 52.7%.

Headline Trader: "The labor market's success will be the primary driver of the Fed's decision on a tapering timeline of its $8 trillion balance sheet. As I discussed yesterday, the Fed's dual mandate is to maintain price stability and reach full employment. Inflation and whether it's as 'transitory' as the Fed claims, has been a big concern for investors, with pricing pressures being seen in virtually every sector of the economy.

"The Fed's outlook that pricing pressures will occur in the short-run but will not be sustained leads me to assume that this dovish group of central bankers won't make its first moves to taper based on short-term inflation data. The speed at which employment returns to normal levels will likely drive the Fed's balance easing timeline (the central banks first move to increase rates)." -- Dan Laboe

Have a Great Weekend!
Jim Giaquinto