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Dow, NASDAQ Rise Just Enough for a 5-Week Rally

The market needed a solid session on Friday to keep its weekly winning streak alive… and that’s pretty much what it got. Two of the major indices gained enough to keep the rally going for a fifth straight week.

The NASDAQ was not forced lower by yesterday’s Intel news, which many had feared would happen after the world’s leading chipmaker missed Q4 revenue and offered a soft Q1 guidance after the bell on Thursday. While INTC was down more than 5% today, the FAANGs were all up led by 3%+ gains for Apple and Netflix.

As a result, the NASDAQ enjoyed the best performance with an advance of 1.29% (or more than 91 points) to 7164.86. The Dow regressed a bit from its approximately 300-point gain in the morning, but still managed an increase of 0.75% (or nearly 184 points) to 24,737.20.

These two indices inched forward enough to secure a fifth-straight week of gains. And by “inched forward”, we mean they advanced by about 0.1%.

The S&P had an even better session than the Dow on a percentage basis. It was up 0.85% to 2664.76, but that was just shy of what it needed to keep its own rally going. It was only down by about 0.2% for the week.

The biggest news on Friday didn’t come from the market, but from Washington. President Trump and Congress agreed to temporarily re-open the government after the longest shutdown in history. The legislation will only keep the doors open until February 15, but for now we can press the pause button on this uncertainty and hope they can figure out a more lasting resolution. While the market didn’t seem too impacted by the shutdown, it’s nonetheless a bit of a morale boost.

Earnings season continues and moves into a new gear next week, including reports from some tech heavyweights like Apple (Tuesday), Facebook (Wednesday) and Amazon (Thursday). After several weeks of moving confidently higher, market action has been a bit more spotty of late amid concerns for slowing global growth and the trade conflict with China (which makes the end of the shutdown all the more important). The season has been pretty good so far, but we are experiencing a slowdown in growth from previous quarters, as was expected. Good reports from the tech giants mentioned above would go a long way in keeping market sentiment positive.

Today's Portfolio Highlights:

Surprise Trader: The tariffs may complicate matters for Caterpillar (CAT) these days, but you can almost always count on this construction & mining equipment giant to top quarterly earnings expectations. In fact, it has beaten the Zacks Consensus Estimate for 15 straight quarters. And now it has a positive Earnings ESP of 0.63% for the report coming before the bell on Monday. Dave thinks CAT is set for another beat. Best of all, the stock has a history of good-sized moves after topping estimates. The editor added CAT on Friday with a 12.5% allocation. Read the full write-up for more.

Counterstrike: The market had a strong close to the week, but Jeremy wants the portfolio to stay neutral for now. Therefore, he shorted a couple Zacks Rank #5s (Strong Sells) on Friday that appear to be getting ahead of themselves amidst declining earnings estimates. Shares of Micron (MU) have soared 35% after getting pummeled for several months, but the editor thinks it will likely pullback soon and consolidate. He shorted it with a 10% allocation. Also, RV maker Thor Industries (THO) has been hurt by the trade impasse with China, though it recently jumped 40% off its lows. With the conflict still raging despite recent talks, Jeremy doesn’t think that rally will last. THO was shorted with a 5% allocation. Read the complete commentary for more on these moves.

Value Investor: "President Trump tweeted out this week that the earnings reports were good and he was right.

"Everyone was waiting for a rash of warnings after Apple's big warning to start the new year, but they never came. Instead, it has been solid reports coming in.

"Many companies are being very, very conservative, however, with their outlooks for the year. They simply don't have any visibility. They don't know what will happen with Chinese trade tensions, the shutdown (as of this morning, at least), Brexit and now, Venezuela.

"Will the US consumer keep spending? Will the housing market bounce back this spring? Those are some more uncertainties. For that reason, guidance has been coming down a bit. They'd rather be under, than have to cut later in the year."
-- Tracey Ryniec

Have a Great Weekend!
Jim Giaquinto

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