After halving the correction losses in just a few weeks, we knew the market would have to take a break and pull back a bit. On Tuesday, the major indices started this shortened week with declines well over 1% each, putting an end to a four-day winning streak.
The NASDAQ took the biggest tumble with a decline of 1.91% to 7020.36, while the S&P was off 1.42% to 2632.9. The Dow slipped 1.22% (or 301 points) to 24,404.48. The indices did come off their lows late in the session.
Stocks have been on a roll since the sharp Christmas Eve pullback. In fact, in the month since that selloff, the major indices have put together four straight weeks of gains. They’ll have to get back on track pretty quickly now to stretch it to five weeks since the market was closed on Monday for MLK Day.
The session came under pressure right from the start on renewed fears of slowing global growth, especially from China. The world’s second-largest economy grew by 6.6% last year according to new data, which was actually its slowest pace in nearly 30 years.
And then we received news reports that the U.S. had cancelled a trade meeting with China officials, leading to another leg lower for stocks. However, the White House refuted the report and said there were no official meetings scheduled, which may have been the main reason why stocks came off their lows in the final hour.
After four weeks in the green, no one is too concerned about Tuesday’s pullback. But it shows just how much we want a real resolution on the trade front. Sentiment has been high of late and the market is expecting some sort of deal in the coming weeks, so less-than-flattering headlines like today’s are going to sting a bit. Perhaps a solid earnings season can keep investor spirits high while Washington figures out the trade impasse and the government shutdown.
Today's Portfolio Highlights:
Home Run Investor: Concerns about this earnings season are overblown, according to Brian Bolan. The editor wants to get the portfolio back up to 15 names as soon as possible, so he added today and will do the same again tomorrow. On Tuesday he picked up Kratos Defense (KTOS), a Zacks Rank #2 (Buy) defense play (of course) that is mostly known for its focus on drones. The company has beaten the Zacks Consensus Estimate for four straight quarters and can’t wait for this government shutdown to end. Read the full write-up for more on this new pick and be ready for another buy on Wednesday.
Surprise Trader: This afternoon’s pullback opened a great opportunity to make a move, so Dave quickly decided to add Alaska Air (ALK) with a 12.5% allocation. This airline topped the Zacks Consensus Estimate for four straight quarters and heads into this Thursday’s after-the-bell report with a positive Earnings ESP of 2.23%. The editor also appreciates that ALK is part of a space in the top 4% of the Zacks Industry Rank. Read the full write-up for more.
Stocks Under $10: Las Vegas stocks have been doing well lately, so Brian Bolan is getting back into Everi Holdings (EVRI). This Zacks Rank #2 (Buy) provider of gaming payment solutions and slot machines was in the portfolio a couple times last year because it was at an attractive entry point. And there’s nothing different this time; Brian thinks it’s a deal at under $7.25. The stock has beaten the Zacks Consensus Estimate for three straight quarters and the editor believes it will do so again when it reports in a few weeks. See the full commentary for more this addition and be ready for another buy tomorrow.
TAZR Trader: The SPX has already rallied more than Kevin originally thought it deserved, so it’s likely stuck in between 2400 and 2800 for the near future. Therefore, the editor plans to take any nice-sized gains that he can get. On Tuesday, he sold Square (NYSE:SQ) for a 30.8% return in a month and Twitter (TWTR) for a 17.9% profit in less than a month.
He also decided to short Workday (WDAY) with a 5% allocation. This Zacks Rank #3 (Hold) provides enterprise cloud applications for human resources and finance. Kevin offered a 4-point rationale on this move in his complete commentary, which includes the stock trading at all-time highs with a low likelihood of being bought. Make sure to read that full write-up for more on all of today’s moves.
Technology Innovators: Usually, Brian Bolan prefers to chase stocks that are moving higher in this portfolio. But he’s trying something a bit different today with the addition of Redfin Corp. (RDFN), an online real estate marketplace that plunged double-digits on Tuesday due to a downgrade. The editor thinks this is a good time to get involved before it rebounds. He believes all the bad news has been priced into the stock and that RDFN is in a good position to capitalize on stabilizing rates. Read the full write-up for more this new buy.
Zacks Short List: The portfolio swapped out two positions this week. It short-covered Newmont Mining Corp. (NYSE:NEM, +2.7%) and Hess Corp (NYSE:HES). (HESS) and then replaced them with the additions of GrubHub (GRUB) and National Oilwell Varco (NYSE:NOV). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.
Black Box Trader: This week’s adjustment switched four portfolio positions. The stocks that were sold on Tuesday included:
• Tractor Supply Co. (TSCO, +7.4%)
• Molina Healthcare (MOH, +1.9%)
• CenterPoint Energy (NYSE:CNP, +1%)
• Santander (MC:SAN) Consumer (SC)
The new buys that replaced these names are:
• Graphic Packaging Holding Co. (GPK)
• HD Supply Holdings (HDS)
• The AES Corp. (NYSE:AES)
• United Continental Holdings (UAL)
Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.
Have a Good Evening,
Jim Giaquinto
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