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New Trade Deal, New Records for S&P and NASDAQ

The market apparently exhausted most of its excitement over the Phase 1 trade deal on Thursday, as stocks couldn’t sustain a morning rally today and finished with only a slight improvement in the session.

Nevertheless, all of the major indices still managed to report gains for the week. The NASDAQ advanced 0.9% and the Dow was up 0.4%.

The S&P now has a three-week winning streak after rising 0.7% over the past 5 days.

We don’t have to worry about those additional tariffs that were scheduled for Sunday, because the recent Phase 1 agreement does away with them. That deadline was looming over stocks all through December, which made the market especially susceptible to daily trade headlines.

The deal also rolls back some of the China tariffs and includes purchases of U.S. agricultural products.

The lead up to this deal sent stocks soaring on Thursday and led to more solid gains this morning. But the market gave almost all of it back.

In the end, the NASDAQ advanced 0.20% to 8734.88, while the S&P and Dow each improved 0.01% to 3168.80 and 28,135.38, respectively.

That’s it? After years of nail-biting and flop sweat, that’s all we get on the first day of Phase 1? A measly 0.01%?

Well, we all know how demanding this market can be. It wanted all of the tariffs to be rolled back, not just some them.

It was hoping to be pleasantly surprised with a deal that came closer to ending the whole conflict with China, but instead it only got what was expected and nothing more.

Yesterday was the day to celebrate an agreement, today was the day to look at the details. It also didn’t help that U.S. retail sales rose less than expected in November.

But we shouldn’t be frustrated as we head into the weekend. Just the opposite! The indices hung onto all of yesterday’s impressive gains, while the NASDAQ and S&P finished with record closing highs!

Most importantly, stocks look better positioned to rally out 2019 now that they don’t have to worry about the Dec. 15 tariffs and can, instead, wait for the Santa Claus Rally to come to town.

Today's Portfolio Highlights:

Insider Trader: The conviction of insiders at small-cap E&P Matador (MTDR) is “incredible”, according to Tracey. Despite the market turning a cold shoulder to this industry for years now, MTDR enjoyed one of the largest cluster buys the editor ever saw late last year. And they’re doing it again! In the past few weeks, the CEO, a SVP and Chief Accounting Officer, and two directors all bought shares of their own company. Tracey likes to see such confidence, so she got back into MTDR on Friday with a 10% allocation. By the way, the portfolio sold all of VICI Properties (VICI) for an 18.2% return in about 4 months, while also selling the rest of Costco Wholesale (COST) and Vera Bradley (VRA) for profits of 18.5% and 4.7%, respectively. Read the full write-up for more on all of today’s moves.  

Surprise Trader: Retail worked well for the portfolio in the most recent earnings season, and Dave decided this was a good time to take solid profits from a couple of them. The editor sold Burlington Stores (BURL) for a practically 10% return in three weeks and RH (RH) for a more than 9% profit in a little over one week! Want a preview for the next season? Dave says you should expect to see more medical device names in the portfolio. 

Technology Innovators: The portfolio ditched a few names on Friday, including NetScout Systems (NTCT) and Roku (ROKU) for gains of 5.9% and 1.1%, respectively, in less than two months. Churchill Capital (CCC) was also sold for a small loss. As a result, the portfolio’s exposure level dipped to almost 50%, so Brian decided to replace one of them immediately by adding Universal Display Corporation (OLED). As the ticker suggests, this company specializes in light-emitting diode screens that are used in smartphones, TVs and much more. It’s a Zacks Rank #2 (Buy) that has beaten the Zacks Consensus Estimate in each of the last four quarters, including a more than 36% surprise last time. Brian also likes its “SOARING” operating margins, which could drive the stock past $225 in the coming months. Read the complete commentary for more on today’s moves.

Blockchain Innovators: The easy money may have been made at Square (SQ), as the payments processor rejected the 200-day. Dave decided it was time to sell the name and take a 26.8% return. The portfolio also sold Safeguard Scientifics (SFE) for an 8.1% profit. The editor plans to make an addition on Monday and perhaps another subtraction too.

Stocks Under $10: The portfolio likes the look of Vista Outdoor (VSTO), a Zacks Rank #1 (Strong Buy) maker of optics, accessories and eyewear that operates in two segments: shooting sports and outdoor products. It makes things like binoculars, laser rangefinders, riflescopes and much more. Shares soared after the company broke even in its most recent report when the Zacks Consensus Estimate was expecting a 9-cent loss. Brian thinks this stock could see a split in the firearms business from the rest of the outdoors business. The editor also sold the underperforming The Rubicon Project (RUBI) and Chimerix (CMRX) positions. See the full write-up for more on today’s moves.

Have a Great Weekend!
Jim Giaquinto

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