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S&P, Dow Snap Five-Day Skid Ahead of CPI Report

The S&P and Dow closed in the green on Monday for the first time in six sessions, snapping a losing streak that began after the disappointing jobs report on September 3rd and persisted throughout last week (which was only four days long due to Labor Day).

Meanwhile, the market is now preparing for a busy week of potentially market-moving data, which begins tomorrow with the most important inflation indicator, the CPI.   

The Dow kicked off this week by climbing 0.76% (or nearly 262 points) to 34,869.63, while the S&P rose 0.23% to 4468.73. These gains snap five-day losing streaks for each index. However, the NASDAQ now has a four-day skid after sliding 0.07% (or less than 10 points) to 15,105.58.

Apple (AAPL) gained 0.39% in the session after plunging 3.3% on Friday when a federal judge ruled against the company in regard to its App Store practices. Apple has one of its big and flashy events tomorrow when we’ll get a look at the iPhone 13 and other hardware.

Stocks are coming back from a rough, though mercifully short, week that saw the Dow plunge over 2% while the other major indices slipped more than 1.5% each.

“The garbage streak put in by the Dow Jones Industrial average is finally over,” said Dave Bartosiak in Surprise Trader (which added a stock on Tuesday despite entering the ‘quiet period’. See more below).

“After a frustrating week of losing day in and day out, the market needed a bounce back. It almost didn’t happen as the over the weekend move was faded early. That negativity subsided late in the day and stocks got back on the good foot.”

The big news tomorrow will be the consumer price index, which could move the market since inflation is a major concern of investors these days despite the Fed calling it ‘transitory’. The expectation is for consumer prices to have risen 5.3% year over year and 0.4% month on month. Those would still be very high, but a blip below the prior print for July.

The PPI report from Friday showed that wholesale costs for businesses were up 8.3% through August and 0.7% from the previous month.

And on Thursday we’ll be getting another important print on retail sales. All of this data – jobs, inflation, retail – promises to make next week’s Fed meeting that much more important as Chair Jerome Powell & friends try to decide when to start shifting the pandemic-era monetary policy.

Today's Portfolio Highlights:

Stocks Under $10: The portfolio is back to being fully invested at 15 names with today’s addition of Express (EXPR), a specialty clothing retailer focused on a younger audience with more than 500 retail and factory outlet stores in the country. The earnings history is mixed with two beats, a meet and a miss over the past four quarters; but the most recent report included a healthy 106% positive surprise. Rising earnings estimates pushed EXPR to an enviable Zacks Rank #2 (Buy) status. Growth expectations for this year are at 57% on the topline, but Brian is most excited for the company’s return to profitability next year. That turn should drive more interest to the name. Read the complete commentary for more info on today’s addition of EXPR. In other news, this portfolio had a top performer today as Diana Shipping (DSX) rose 6.9%.

Surprise Trader: How do you build a better portfolio? Well, you can gain exposure to solid spaces like Building Products – Home Builders, which is in the top 19% of the Zacks Industry Rank. That’s what Dave did on Monday through the addition of KB Home (KBH), which has beaten the Zacks Consensus Estimate in 15 out of the last 16 quarters. The company has a positive Earnings ESP of 1.12% for the quarter coming after the bell on Wednesday, September 22, so the editor is expecting that impressive earnings history to continue. Analysts are looking for $1.60, which would represent year-over-year growth of 92%. Dave added KBH today with a 12.5% allocation, while also getting out of ABM Industries (ABM) with a small loss. Learn more about today’s action in the full write-up.

Commodity Innovators: We knew that ProShares Ultra Bloomberg Natural Gas (BOIL) was a short-term investment when Jeremy added it back on August 25. But the more than 65% move in the name since then might have been a bit of surprise for the editor. Nevertheless, BOIL hit his target “and then some”, so the portfolio sold it on Monday and cashed in that double-digit profit in less than three weeks. Jeremy says it could run higher, but he’s a bit concerned about overnight headlines that could bring it down quickly. The big concern is that governments might be forced to step in and stop the surge in natural gas, so let’s not be greedy. Furthermore, the service had a top 5 winner today as EnLink Midstream (ENLC) rose 6%.

Black Box Trader: The portfolio replaced four names in this week's adjustment. The stocks that were sold included:

• CBRE Group (CBRE, +2.4%)
• Cleveland-Cliffs (CLF)
• Realogy (RLGY)
• Sonos (SONO)

The new buys that filled these spots were:

• Levi Strauss (LEVI)
• LKQ Corp. (LKQ)
• PVH Corp. (PVH)
• Textron (TXT)

Read the Black Box Trader’s Guide to learn more about this computer-driven service. Meanwhile, Range Resources (RRC) was a top performer on Monday by climbing 6.6%.

All the Best,
Jim Giaquinto

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