The S&P Stands Alone in Record Territory

The market liked what it heard out of the virtual Jackson Hole get-together on Thursday, allowing the major indices to cross over some impressive milestones intraday before a late slide left them mixed for the session.

Rates will likely stay at historically low levels even longer than we originally thought, as Fed Chair Jerome Powell outlined a new policy today that would allow inflation to move moderately above 2% for some time.

There are two things the market just can’t get enough of right now: progress in fighting the coronavirus and cheap money. Fortunately, we’ve been getting good developments on both fronts lately.

In fact, just today we got news of a Covid test from Abbot Labs (ABT) that takes 15 minutes and costs $5! The stock was up 7.85% today.

Stocks rose on the Fed news, sending the Dow into positive territory for the year and the S&P above 3500. But it was only momentary as stocks slipped into the close.

Nevertheless, the S&P has now put together five straight sessions of new highs. It climbed 0.17% today to a record 3484.55. And the Dow rose 0.57% (or about 160 points) to 28,492.27.

For a change of pace, the NASDAQ was the index left out of the upsurge this time. It slipped 0.34% (or nearly 40 points) to 11,625.34 to snap five days of record runs.

The FAANGs just didn’t have it today as they all dropped by well over 1%, especially Netflix (NASDAQ:NFLX, -3.88%) and Facebook (NASDAQ:FB, -3.52%). (Don’t feel too bad, though, since those stocks were up more than 11% and more than 8%, respectively, on Wednesday.)

Another big part of Thursday was this week’s jobless claims report, which was a bit overshadowed by the Fed news. Approximately 1.06 million people filed last week, which was an improvement from the previous result.

However, any reading of one million or more feels a bit disappointing these days after slipping below that mark two weeks ago.

The major indices all head into Friday with solid gains for the week. The NASDAQ and S&P are both up by more than 2.5% after several record closes, while the Dow is up about 2%.

Today's Portfolio Highlights:

Technology Innovators: The super strong salesforce.com (CRM) results have Brian in the mood to add a software name. Therefore, he picked up Descartes Systems (NASDAQ:DSGX), a leading provider of software-as-a-service logistics solutions. It has beaten the Zacks Consensus Estimate in three of the past four quarters. Earnings estimates are not exactly flying higher, but they are moving enough to make DSGX a Zacks Rank #2 (Buy). The editor is most impressed with earnings growth, which calls for a jump to 88 cents next year from 56 cents this year. Meanwhile, the portfolio also sold Veeco Instruments (NASDAQ:VECO). See the complete commentary for more on today’s buy.

Surprise Trader: Last time eGain (NASDAQ:EGAN) reported earnings, it beat by 700%! And this provider of customer engagement solutions has a positive Earnings ESP of 50% for the quarter coming after the bell on Wednesday, September 2. However, Dave reminds us not to get too caught up in percentages, since small EPS numbers usually lead to huge surprises and ESPs. The important thing is that EGAN has a good record of beating expectations and appears set to do so again. Plus, earnings are expected to grow 15.6% this year. The editor added EGAN on Thursday with a 12.5% allocation, while also selling Nu Skin (NUS) for a nice 3.8% return in a little over three weeks. Read the full write-up for more.

Income Investor: "The biggest market-driving headline was the Fed’s new policy change.

"Dubbed “average inflation targeting,” this means that the central bank will allow inflation to run above its 2% goal. By doing this, the Fed won’t be under pressure to raise interest rates, which are near zero right now, once the unemployment rate begins to decline.

"A 2% inflation rate has been seen as indicative of a healthy economy for years now, but the U.S. has often lagged this target since the 2008 financial crisis.

"Powell also made it clear the Fed’s concern for those in low- and moderate-income communities, as well as those who may not easily bounce back from the economic downturn seen this year. The job market should not be strong for just high-income earners or those that are well off, but for people who experienced job loss over the past few months." -- Maddy Johnson

All the Best,
Jim Giaquinto