Stocks finally had a decent pullback on Thursday after a week of solid economic data and new records for the major indices. A worse-than-expected jobless claims result and fears of the Covid variant expediated the selloff this morning, but stocks still came well off their lows by the close.
After hitting records in eight of the previous nine sessions, the S&P saw the biggest decline today by slipping 0.86% to 4320.82. The Dow dropped 0.75% (or nearly 260 points) to 34,421.93, while the NASDAQ’s three days of new highs came to an end with a decline of 0.72% (or about 105 points) to 14,559.79.
The major indices now head into Friday’s session with losses for this shortened week. They were all up 1% or more in the previous week.
"With the S&P 500 hitting new all-time highs 7 sessions in a row until this week, and up about 15% so far this year, no one should be surprised that it might take a breather,” said Tracey Ryniec in Insider Trader. "It's just been a number of months since we last experienced it so it feels off. But don't panic. Look for opportunities."
We’ve grown accustomed lately to solid employment reports, but this week’s jobless claims data was a bit on the disappointing side. The print came to 373,000, which was more than expectations of around 350K and slightly ahead of the previous week’s upwardly revised 371K.
Nevertheless, the result still stayed below 400K for a second week.
The market was also a bit unnerved by the spread of new and more stubborn Covid variants across the globe, especially after Japan declared a state of emergency and announced that the Tokyo Olympics would be held without spectators. Such developments go against the positive tide we’ve been enjoying of late, but the editors are already preparing to put some money to work on any pullbacks.
Let’s see if the market’s mood improves tomorrow...
Today's Portfolio Highlights:
Stocks Under $10: You may remember that Brian sold two names earlier this week, but added back only one. So the portfolio is one position shy of being fully invested, which the editor fixed on Thursday by adding Casa Systems (NASDAQ:CASA). This Zacks Rank #2 (Buy) is a developer and provider of digital cable video and broadband services. The company has beaten the Zacks Consensus Estimate in each of the last four quarters with an average surprise of around 200% over that time. Margins doubled in the March quarter from the December quarter, which suggests that the stock could head much higher moving forward. Read the full write-up for more on this addition. By the way, this portfolio had the two best performers of the day with Cassava Sciences (NASDAQ:SAVA, +9.5%) and GT Biopharma (GTBP, +6.3%).
Surprise Trader: With earnings season about to begin, it’s only fitting that Dave would pick up a company that’s known for being one of the earliest reporters. On Thursday, the portfolio added Alcoa (NYSE:AA) with a 12.5% allocation. The aluminum giant is part of a space (Metal Products – Distribution) that’s in the top 8% of the Zacks Industry Rank. This Zacks Rank #1 (Strong Buy) beat by 64.5% in its last report, which marked its fifth straight positive surprise. And now it has a positive Earnings ESP of 5.87% for the release coming after the bell on Thursday, July 15. In other news, the editor cleared out another legacy name to make room for earnings season. He sold semiconductor memory giant Micron (NASDAQ:MU) today for a slight loss. Learn more about today’s moves in the complete commentary.
Commodity Innovators: Big day for the portfolio with two buys and two sells. Jeremy added Continental Resources (NYSE:CLR) and CF Industries (NYSE:CF), which are both Zacks Rank #1s (Strong Buys) that have a good chance of heading higher into year’s end. CLR is an E&P company that has pulled back, but should be supported by rising energy prices. CF is a fertilizer name that gives the service exposure to grain prices. The editor considers these positions to be mid-term and long-term holdings, respectively. Meanwhile, the technical long play in IPath Series B Bloomberg Coffee Subindex Total Return ETN (JO) looks to be over, so Jeremy sold the position on Thursday for a nearly 20% return in a little over three months. And Sibanye Gold Ltd. (SBSW) could slide even lower after revisiting the 200-day, so it was sold for a loss. Read the complete commentary for more specifics on these moves.
Options Trader: "I heard some people say they are suddenly worried about the growth outlook. (Why? Because one Weekly Jobless Claims report finally ticked up one week after months and months of going down?)
"Then I read of some people now being worried about deflation. (Really? A few short weeks ago, everybody was wringing their hands over the prospect of runaway inflation. (Also wrong.) Now they’re going in the other direction?)
"Just a lot of noise. And nothing out of the ordinary seeing the market go down a bit (markets were down less than -1%).
"After one of the best first-half performances in years; the S&P up 5 quarters in a row; and being up 10 out of the previous 12 days (and making 8 new all-time highs in the process), a little bit of profit taking should not come as a total shocker." -- Kevin Matras
All the Best,
Jim Giaquinto
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