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Still Thinking About Trade as Earnings Season Begins

If you thought we’d get a little respite from the trade issue after last week’s agreement… you thought wrong!

According to news reports, China wants more discussions before signing onto the “Phase One” deal announced this past Friday.

With memories still fresh of an earlier trade deal falling apart in the eleventh hour, investors are concerned that any progress made recently could easily be undone.

The news snapped the major indices’ three-day winning streak on Monday, though the losses were nowhere near as severe as you’d think for a negative trade headline.

The S&P slipped only 0.14% to 2966.15, while the Dow was off 0.11% (or nearly 30 points) to 26,787.36. The NASDAQ dipped 0.10% (or around 8 points) to 8048.65.

Each of the indices saw some green on this slow Columbus Day session, in which banks and bond traders had the day off.

On Friday, the major indices each jumped well over 1% on a partial trade agreement in which the U.S. delayed the Oct. 15 tariff hikes and the Chinese agreed to buy $40 to $50 billion more agricultural products.

The market soared in response and helped the Dow and S&P snap three-week losing skids. However, it was back to skepticism on Monday as the excitement wore off.

But this week is probably not going to be about trade. Earnings season unofficially starts tomorrow with reports from some of the big banks, including JPMorgan, Wells Fargo and Citigroup.

Today's Portfolio Highlights:

Surprise Trader: With earnings season AND the holiday shopping season both right around the corner, it seems fitting for Dave to buy one of the biggest and most recognizable toy companies in the world. Hasbro (HAS) brands include Play-Doh, Transformers and Monopoly, among many others. It also has the rights to make Star Wars and Marvel toys. This Zacks Rank #2 (Buy) is coming off a couple strong quarterly beats, including a surprise of more than 50% last time. And its got a positive Earnings ESP of 1.4% for the quarter coming before the bell on Tuesday, October 22. The editor thinks this positive earnings trend is going to continue, so he added HAS on Monday with a 12.5% allocation. Read the complete commentary for more.

Stocks Under $10: Under normal circumstances, the homebuilders would be a great way for investors to capitalize on lower rates. However, as far as this portfolio is concerned, there are no good options in the space under $10. So Brian had to look elsewhere… and he found something! Realogy (RLGY) is a real estate brokerage conglomerate that owns brands like Century 21 and Coldwell Banker, among several others. The stock bottomed out in late August, but has been recovering ever since. Earnings estimates are ticking higher, which explains its status as a Zacks Rank #1 (Strong Buy). The editor really appreciates its valuation, which suggests he’s getting a discount price for a stock with great growth prospects. Read the full write-up for a lot more on today’s addition of RLGY. 

Black Box Trader: Three of the four stocks leaving the portfolio this week brought positive results to subscribers. The positions that were sold include:

• RH (RH, +8.1%)
• Lowe's Cos. (LOW, +0.63%)
• T-Mobile US (TMUS, +0.59%)
• Guess? (GES)

The new buys that filled these open positions are:

• Arconic (ARNC)
• International Game Technology (IGT)
• Jacobs Engineering Group (JEC)
• US Foods Holding Corp. (USFD)

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing. 

Counterstrike: "There was some selling in the overnight session as reports out of China came that they wanted to talk more before signing any deal. This stalling wouldn’t be a good sign, but markets didn’t seem too concerned for now. I have a feeling the headlines on this will not stop and we can expect China to be the main market mover into the end of the year.

"As we officially head into earnings season, Apple continues to lead the market as the stock hit all-time highs for the second session in a row. It will be interesting if earnings can perform as expected. But before we see AAPL on October 30th, we will see a bunch of financials this week.

"Let’s hope today doesn’t set the tone for the week. I would like to see some follow through to the upside to 3000, but we could fill the gap at 2940. The VIX died at the end of the day, trading close to 14.50. While the futures contract is rolling over, the move lower could signal a push higher is coming. As always, the China trade headlines will dictate the direction."
-- Jeremy Mullin

All the Best,
Jim Giaquinto

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