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Dow Cuts 800-Point Loss to 80 in Huge Rebound

That could’ve been a lot worse. In fact, it WAS a lot worse at midday! The market came close to totally wiping out its recent 6-day rally in just 2 sessions (Tuesday and today), but then it staged an epic comeback that almost brought all the major indices back to the positive side.

The Dow finished with a loss of only 0.32% (or nearly 80 points) to 24,947.67. That’s a whole lot better than plunging nearly 800 points, which was its low today! Remember, it slumped nearly 800 points on Tuesday as well. The S&P also enjoyed a dramatic turnaround and finished with a slight decline of 0.15% to 2695.95.

Most impressive, though, was the NASDAQ, which succeeded in coming all the way back to finish in the green. It was up 0.42% to 7188.26 as all of the FAANGs gained by at least 1% except for Apple. Netflix was the best performer with a rise of 2.74%.

“I loved today’s close. The fact that we gapped down so much and individual stocks didn’t really get hit bad was a signal. When FANG started to rally, we really got a great rally. Hopefully we see more strength going into the weekend,” said Jeremy Mullin in Counterstrike.  

Despite the 90-day reprieve on further tariffs, the market has been second-guessing just how successful the G-20 meeting in Argentina really was. Did President Trump and President Xi make some real progress? Or just postpone the trade conflicts for another month-and-a-half?

And then today we got a rather bizarre story that the CFO for a big Chinese tech company was arrested in Canada and is to be extradited to the U.S. The arrest was for allegedly violating trade sanctions on Iran and it happened right around the time the two leaders were having dinner over the weekend. Needless to say, the market is a bit concerned that this could hurt the fragile relationship between the U.S. and China. We’ll certainly be hearing more about this in the days ahead.

But just when you thought the day was lost, stocks bounced back on news reports that the Fed would consider slowing the pace of future hikes after December. Basically, the market took it the same way it did Fed Chair Jerome Powell’s speech on November 28 when he stated that interest rates were “just below” neutral.

Assuming no more surprises, the big news on Friday will be the jobs report. The market is expecting another solid number with about 200,000 payrolls being added in November. Last time, the economy added 250,000 jobs, which blew past expectations of around 185,000. We’ll see if this report can thread the needle and come in right around expectations, because it could potentially be a negative for stocks if it's too hot or too cold.

Today's Portfolio Highlights:

Technology Innovators: The third quarter marked the fifth straight positive surprise for software company Okta (OKTA). It lost four cents in the period, but that was much narrower than our expectation for an 11-cent loss. The company now has an average beat of more than 41% over the past four quarters. Revenues jumped 57.8% to $105.7 million, which was also ahead of the Zacks Consensus Estimate. Shares rose nearly 10.4% on Thursday, marking the best performance among all ZU names. OKTA is also the best performer in this portfolio, having gained more than 64% since being added in April.

Momentum Trader: "Anything the market interprets as an escalation of the trade war will be met with selling. The same goes for increased hawkishness from the Fed. Every time a headline hits the wires, you have to ask yourself how it affects these two major market issues. These two themes will overpower everything.

"Early on, the sellers had the upper hand, forcing the market down to lows. The intraday bounce was fueled by dovish comments out of the Fed. The Wall Street Journal reported that the Fed is considering whether to take a wait-and-see approach to rate hikes. A slowing of the pace of hikes would certainly help quell this major market concern. It definitely helped the market today, giving stocks a lift off the bottom.

"You saw a flip in risk during market hours. The morning was dominated by risk of the trade war accelerating while the afternoon turned bullish based on dovish Fed commentary. Even if we can get a quiet period on trade, the market will right itself here due to the Fed’s moves. Essentially, the Fed is not unreasonable and they are not going to snuff out the market."
-- Dave Bartosiak 

Insider Trader: "I see some dangers in the Fed acquiescing so quickly to the first signs of a slowdown, if that is, indeed, what they will be doing. The odds of the Fed raising in December has dropped to just 52%. That raise was considered a "sure thing" just a few weeks ago. The odds were once above 90%. 

"However, I don't see any possibility of the Fed NOT raising this month. They will. It would be madness if they didn't with the ISM for manufacturing at 59 and the ISM for Services at 60 and unemployment below 4%. 

"But, if the Fed is going to "pause" in early 2019, this is confirmation that the stock market tantrum worked. And, frankly, that worries me more than the Fed making the wrong move." -- Tracey Ryniec 

All the Best, 
Jim Giaquinto

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