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Stocks Take It Slow to Start the Week

It’s looking like ‘one of those weeks’ for the market, as we wait for trade news out of China and prepare for the next round of earnings reports. Plus, we’ll be watching to see if Washington shuts down the government for the second time this year… and its only February!

With so much uncertainty in the air, it makes sense that the major indices would only be able to breakeven on Monday. The NASDAQ improved 0.13% to 7307.9, while the S&P advanced 0.07% to 2709.8.

The Dow started higher by nearly 100 points, but ultimately dropped into the red for most of the day and finished lower by 0.21% (or about 53 points) to 25,053.11. The indices all slipped into the red at one point, but another late advance lifted them off the lows.

According to reports, the U.S. and China are in talks to get Presidents Trump and Xi together at a summit sometime next month, possibly at Mar-a-Lago in Florida. Last week, the market was very disappointed to hear that the two leaders would definitely not be meeting before the trade deadline on March 1 when tariffs are expected to be raised.

Nevertheless, scheduling such a meeting would be a big positive, since there isn’t likely to be a real trade deal until the two bigwigs meet in person. Perhaps Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer can lay the groundwork with their Chinese counterparts that will lead to a true success when the big meeting happens sometime next month. Fingers crossed...

Meanwhile, the Dow and NASDAQ will be going for an 8th straight week in the green. The S&P will be trying for a third straight, though its only fallen short one week since the market got its act together on Dec 26. Last week, stocks barely kept their winning streak alive as the last several sessions came under pressure due to trade concerns.

Maybe trade can actually be the catalyst that takes us higher this week. You never know!

Today's Portfolio Highlights:

Home Run Investor: If you’ve ever taken a survey online, then there’s a good chance you used the software developed by Survey Monkey (SVMK). The company was founded about 20 years ago, but its only been in the market for a few months. The upcoming report after the close this Wednesday will only be its second as a public company. As a result, Brian Bolan doesn’t have a lot of data to crunch in making this move. However, he likes investing in a name that is fresh to the market and has earnings estimates that are inching higher, underscoring its status as a Zacks Rank #2 (Buy). Read today’s write-up for more on this new buy and be ready for another addition on Wednesday.

Surprise Trader: There’s plenty of earnings season left… which means there’s also plenty of buying yet to come for this portfolio. The first pick this week is Sunoco (SUN), a Zacks Rank #1 (Strong Buy) MLP that distributes motor fuel to about 10,000 locations across the country. The company has easily beaten the Zacks Consensus Estimate in the past two quarters. Given its positive Earnings ESP of nearly 27% for the quarter coming after the bell on February 20, Dave thinks SUN is all set for a third straight surprise. The editor added it on Monday with a 12.5% allocation. See the full write-up for more.

Insider Trader: On the day after Christmas last year, Tracey bought a few E&Ps because insider activity suggested that the dramatic selling in the energy space was waaaay overdone. They were right! But now the editor believes that the oversold rebound is over in this industry for now. Berry Petroleum (BRY) and Parsley Energy (PE) both saw their Zacks Ranks decline in recent days, so Tracey used a bounce in these names on Monday to bank a couple double-digit gains. She sold BRY for a 24.3% return and PE for a 15.7% profit in less than two months. Since they’re still undervalued, the portfolio would be open to buying them again if the insiders jump in on another pullback.

Technology Innovators: Security plays have been posting good numbers lately, so Brian Bolan decided to make Zscaler (ZS) his fourth buy in the past five sessions. The company is a cloud security play and it is scheduled to report again on the last day of this month. Analysts haven’t been giving ZS much love of late, despite its “nice-looking chart”. However, the editor thinks that will change, which is why he’s open to holding this name through its quarterly report. He believes ZS will be a “big time winner” if its topline growth continues. Read the full write-up for a lot more on this new buy, along with Brian’s general market review.

Black Box Trader: Four positions were swapped out in this week's adjustment. The portfolio said goodbye to:

• Taylor Morrison Home Corp. (TMHC)
• American Airlines (AAL)
• Omnicom Group (OMC)
• Dana Inc. (DAN)

The new buys that filled these spots today were:

• Boot Barn Holdings (BOOT)
• Anthem (ANTM)
• Synchrony Financial (SYF)
• Aspen Insurance Holdings (AHL)

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

Zacks Confidential: Technical analysis is one of the best tools to find stocks poised to move higher… but it can also be intimidating. There are hundreds of different technical indicators that you can use! What's the best one? For Dave Bartosiak, it’s all about the moving average. In this week’s Zacks Confidential, Kevin asked Dave to explain why he likes moving averages so much and how it can be combined with the Zacks Rank for “an incredible one-two combination”. Read his article and get three recommendations by clicking: Why Moving Averages Mean Everything.

Counterstrike: "Well, there was some positive news last night in regards to trade. Apparently, the White House is in discussions with Beijing over a meeting between Trump and Xi. The venue is in question, but it sounds like this will happen.

"Markets were higher overnight on the news, but for a substantial rally, we need substance. We need a real deal announced, or even “one in the works” with the details to be ironed out. That could happen this week With Munchin and Lighthizer in China this week to talk trade. Until the results of these negotiations are known, I expect the market to be stuck.   

"Very calm Monday to start the week, which was kind of nice from what we have seen over the last few months. I expect that to change as we get closer to March 1 and the china trade deal headlines come out. Until then we will stay inactive for the most part. However, I will have a trade coming tomorrow so be on the lookout for an alert."
-- Jeremy Mullin

Until Tomorrow,
Jim Giaquinto

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