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Stocks Lower for Second Straight Day on Hot CPI Data

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And just like that, stocks have now dropped for two straight days after rallying to several new highs in the previous eight sessions. A hotter-than-expected CPI report has investors wondering if the Fed will need to alter its easy-does-it taper plan.

Consumer prices in October were up 0.9% month over month, which was much higher than expectations of 0.6% and September’s 0.4%. It surged 6.2% year over year, also missing forecasts for 6% and jumping from the previous month’s 5.4%. As you’ve probably heard, it’s the fastest annual rise in more than three decades.

Investors are wondering if the Fed’s “transitory” label for this sweltering inflation still holds water. Because if these rising prices don’t simmer down soon, the fear is that the Committee will have to accelerate its tapering plan and maybe even hike interest rates sooner than expected.

“So, we have an issue here where the Fed is forced to possibly change their stance on transitory. The number is going up, not down. Traders will be watching what the Fed says and does next,” said Jeremy Mullin in Counterstrike.

On Wednesday, the NASDAQ plunged 1.66% (or nearly 264 points) to 15,622.71, as Treasury yields spiked after the CPI report. The S&P dropped 0.82% to 4646.71. These indices both saw their eight-day record setting runs end yesterday, and got roughed up today for their technology exposure. The Dow slid 0.66% (or around 240 points) to 36,079.94.

In other news, jobless claims continue setting pandemic-era lows. The number came to 267K last week, which was below the previous week’s upwardly-revised 271K and marks five straight weeks below 300K. Unfortunately, it wasn't enough to offset the CPI news. (The report is coming out a day earlier than usual due to Veteran’s Day tomorrow.)

Finally, shares of Disney (DIS) are down more than 4% afterhours, as of this writing. After the bell today, the entertainment giant missed on both the top and bottom lines in its fourth-quarter report. A slowdown in Disney+ subscribers was part of the problem...

Today's Portfolio Highlights:

Counterstrike: The portfolio added a couple Zacks Rank #1s (Strong Buys) on Wednesday that crushed earnings estimates in recent reports. Yelp (YELP) runs an online community that shares ideas on restaurants, shopping, nightlife, financial services, health and a variety of other topics. The company beat earnings expectations for six straight quarters, so now Jeremy will give it a try with hopes that it can move past $42 again. The other buy is Rocket Companies (RKT), which engages in the tech-driven real estate, mortgage and e-commerce businesses. The editor considers this a value play with a good risk/reward to get back above its post-earnings high around $18.70. The service added YELP with a 6% allocation and RKT with an 8% allocation. Read the full write-up for a lot more on these moves, including their targets and stops.

Surprise Trader: Demand for Wi-Fi speakers are “through the roof” these days, which is a big reason why Dave added Sonos (SONO) on Wednesday. Of course, it also helps that this smart speakers company put together five straight quarters of positive surprises with the most recent beat surpassing 250%! And now this Zacks Rank #1 (Strong Buy) has a positive Earnings ESP of 200% for the report coming after the bell on Wednesday, November 17. The editor added SONO today with a 12.5% allocation, while also selling the underperforming PlayAGS (AGS) position. Read the full write-up for more on these moves. By the way, this service had a couple top performers today with GoHealth (GOCO) gaining 8.6% and CarGurus (CARG) rising 5.6%.

Commodity Innovators: Sweltering inflation numbers are making the metals space look pretty attractive right now, so Jeremy added two names on Wednesday that should be resistant to surging prices. The editor thinks that the price of silver will catch up to the price of gold, but the portfolio didn’t have any exposure to that precious metal. Until now. iShares Silver Trust (SLV) was added today with a mid-term holding period. This fund tracks the daily move of silver (of course), which Jeremy thinks is headed toward its 200-day and could get back to $28 “quicker than most people think”. Meanwhile, the portfolio already had some gold exposure, but a little more can’t hurt as prices move higher. Jeremy added ProShares Ultra Gold (UGL) today as well, which offers 2X exposure to gold. He considers this a short-term trade. Read the full write-up for more on today’s moves.

All the Best,
Jim Giaquinto

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