Stocks just finished off this abbreviated week with their worst session in what’s now a five-day losing streak, leaving all of the major indices with sharp declines in just four days as investors worry about the delta variant’s impact.
The NASDAQ saw the stiffest percentage drop of the week today among all major indices by slipping 0.87% (or about 132 points) to 15,115.49. The index dipped 1.6% for the whole week.
In addition to the general malaise at the moment, the NASDAQ also had to deal with Apple (NASDAQ:AAPL) plunging 3.3% after a federal judge ruled against the iPhone maker in regards to its App Store practices.
Meanwhile, the Dow declined 0.78% (or 271 points) to 34,607.72 and the S&P was off 0.77% to 4458.58, bringing their weekly losses to 2.2% and 1.7%, respectively.
Not to keep dwelling on bad news, but the market has been ill-tempered ever since the Government Employment Report last Friday, when the 235K jobs added in August missed expectations by nearly 500K.
The Dow and S&P finished in the red that session and haven’t seen green since, marking a five-day skid in what’s historically been the worst month of the year for the market. The NASDAQ managed a tiny 0.07% advance on Tuesday.
And today’s report on U.S. producer prices added more fuel to investor concerns. Wholesale costs for businesses rose 0.7% last month, which was less than the previous print but still very high. Through August, the index surged 8.3%. The Fed considers these rising prices to be transitory, but investors are still nervous given all the other uncertainties at the moment. The CPI will be released on Tuesday.
Rising inflation is bad enough, but the market’s real worry right now is the delta variant throwing cold water on the economic recovery. The Federal Reserve has a two-day meeting later this month that will tackle these issues and possibly provide an update on any potential tapering of its asset purchases.
Today's Portfolio Highlights:
Blockchain Innovators: The Voice over Internet Protocol (or VoIP) space has been involved with blockchain for years now. The technology helps to add layers of security and improve the authentication process. VoIP is a big part of Ooma (NYSE:OOMA), which provides communications solutions and other connected services to small business, home and mobile users. Therefore, such exposure makes OOMA a good pick for this portfolio. The company enjoys an excellent earnings history with an average surprise of 55% over the past four quarters. Plus, rising earnings estimates made it a Zacks Rank #2 (Buy), while next year’s sales and earnings are expected to grow 8.7% and 23.3%, respectively. Read the full write-up for a lot more on today’s addition of OOMA.
TAZR Trader: The portfolio raised even more cash before the weekend by taking profits on two positions. First of all, Kevin thinks the service has captured most of the gains for Cadence Design Systems (NASDAQ:CDNS), especially after pushing to new highs today. He still loves this company, but decided to sell into strength and get a 34.6% return in less than four months. Secondly, the editor expected Advanced Micro Devices (NASDAQ:AMD) to stay strong for a while longer, so he sold about half of it today for a nearly 30% profit in just under three months. The portfolio may buy more at a cheaper price once the indices revisit their 50-day MAs.
Options Trader: "The markets started off in positive territory today, but were quickly put on the defensive after the Producer Price Index (PPI) for August rose 8.3% y/y. Quite frankly, that was not a surprise as it came in exactly as expected. But it was the biggest increase since 2010. And that just added to an already difficult week.
"It should also be pointed out that the Fed still expects these higher inflation readings to be transitory. Aside from appearing exaggerated due to base effects (comparing things to last year’s pandemic-subdued numbers), the higher inflation readings are also being attributed to supply disruptions and worker shortages.
"Those should start seeing some relief as the enhanced unemployment benefits came to an end earlier this week, which means millions of workers, which were incentivized to stay home rather than rejoin the workforce, will be forced to look for work.
"And with more jobs available than there are unemployed people to fill them, their reentry into the workforce will be greatly welcomed. And that will begin to ease supply constraints and labor shortages, thus adding to economic growth while simultaneously helping to ease inflation." -- Kevin Matras
Have a Great Weekend!
Jim Giaquinto
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