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NASDAQ, S&P Close at New Records on Fourth Day of Gains

The NASDAQ and S&P advanced for a fourth consecutive session on Tuesday despite concerns about the delta variant and potential taper talk at the virtual Jackson Hole event later this week. As a result, those two major indices finished the session with fresh record highs.

The NASDAQ already set the milestone on Monday after back-to-back gains of over 1%. The tech-heavy index outperformed its counterparts yet again today with a rise of 0.52% (or about 77 points) to 15,019.80, marking a fourth straight day in the green.

The S&P began Tuesday less than 1 point away from its own closing high, which it easily overcame by rising 0.15% to a new record of 4486.23. Meanwhile the Dow moved higher 0.09% (or around 30 points) to 35,366.26.   

One of the big events today was the fiscal second quarter report from Best Buy (BBY), one of the last major retailers of this very encouraging earnings season. And the consumer electronics giant didn’t disappoint. Earnings per share beat the Zacks Consensus Estimate by more than 56%, while sales jumped nearly 20%. Most importantly, BBY raised its fiscal year comps view.

Shares of the company surged 8.3% today. Wednesday’s reports include (CRM), Ulta Beauty (ULTA), DICK’S Sporting Goods (DKS) and Williams-Sonoma (WSM), among several others.

The major news of the whole week, though, probably won’t come until Friday, when Fed Chair Jerome Powell makes remarks during the annual Jackson Hole Economic Symposium (which isn’t really in Jackson Hole due to the delta variant).

Minutes from the July Fed meeting suggested that members were warming up to the idea of some tapering, perhaps as early as later this year. Investors will be watching for any further hints on a timeline, which could provide for a crazy end to the week.  

“Because of the delta variant, markets are expected Powell to hold back on taper talk. All we can do is wait and watch how the market reacts,” said Jeremy Mullin in Counterstrike. “I am not expecting a lot of surprises from Powell, but I think the market is being complacent about how tapering might affect stocks.”

Today's Portfolio Highlights:

Stocks Under $10: After cutting five names last Tuesday (and another one today), this portfolio has plenty of open spots. Brian filled two of them on Tuesday by adding Babcock (BW) and Oaktree Specialty Lending (OCSL), which are both Zacks Rank #2s (Buys). BW offers energy technology and services for the nuclear, fossil and renewable power markets. Improving margins and topline growth has the editor expecting a higher stock price down the road. OCSL is a specialty finance company that has beaten earnings estimates three times in the past four quarters and matched once. Brian likes its valuation, especially when considering topline growth of 90% and increased operating margins. By the way, the portfolio also sold the underperforming Volt Information Sciences (VOLT) position today. Read the full write-up for more on all of today’s action. By the way, this portfolio had the top performer among all ZU names today as GT BioPharma (GTBP) jumped 17.2%.

Counterstrike: Shares of Sonos (SONO) surged higher after the audio products company announced a “monster” quarter, which included a 258% beat and a raised guidance. Earnings estimates advanced as well and turned the stock into a Zacks Rank #1 (Strong Buy). Furthermore, a few price targets have even moved past $50, which is about 20% higher than the current level. But the stock has pulled back a bit and held steady for a while. Jeremy agrees with those raised targets and believes SONO could get past $50 moving forward, so he added the stock on Tuesday with a 12% allocation. Read the complete commentary for more specifics.

Large-Cap Trader: With a week left in the month of August, John thought this was a good time for his monthly fine-tuning. He began by getting out of three “sidewinders”: Williams-Sonoma (WSM, +2.8%), ManpowerGroup (MAN, +1.3%) and Kimberly-Clark Corp. (KMB). Their lethargic action since being added suggests that forward earnings news is priced in. The editor is refocusing the portfolio in the electronics area (broadly defined) by adding the following three names:

• ON Semiconductor (ON)
• Flex Ltd. (FLEX)
• Eaton Corp. (ETN)

These names are big players in the semiconductors, electronics manufacturing services, and industrial manufacturing electronics spaces, respectively. They all have enviable Zacks Ranks, especially ON’s status as a Zacks Rank #1 (Strong Buy). They are also from top-ranked industries and recently reported double-digit EPS surprises. In fact, their average beats over the past four quarters are in the double digits as well. John added each name with a portfolio weight of 6%. Read the full write-up for a lot more specifics on these new buys, including their valuations and betas.

Surprise Trader: You may remember that Ulta (ULTA) has been a part of this portfolio several times over the years... and now it is again. But this time the beauty products staple enters the service as a Zacks Rank #1 (Strong Buy) after beating expectations for four straight quarters. The last positive surprise was 113%. Ulta has a positive Earnings ESP of 17.59% for the quarter coming tomorrow after the bell, which is a good sign that it’s poised to outperform for a fifth straight quarter. Dave added ULTA on Tuesday with a 12.5% allocation, while also selling Terex (TEX) for a 9.8% return in less than a month. Read the full write-up for more.

Options Trader: After trading in a confined range for much of the year, Kevin noticed that Chubb (CB) has finally broken out to the upside. He sees a great opportunity to add this property & casualty insurance and reinsurance company, especially since it’s a Zacks Rank #1 (Strong Buy) in a highly-ranked industry (top 17%). On Tuesday, the editor bought to open a January 190.00 Call in CB. Make sure to read the full write-up for a recap on this move and the whole portfolio.

Zacks Short Sell List: The portfolio cashed in a double-digit winner on Tuesday as part of three changes in this week's adjustment. The stocks that were short-covered included:

• JOYY Inc. (YY, +29.4%)
• (JD, +7.4%)
• Amazon (AMZN)

The new additions that filled these spots were:

• Huazhu Group (HTHT)
• Canada Goose (GOOS)
• The AZEK Company (AZEK)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

Have a Good Evening,
Jim Giaquinto

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