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Stocks Take a Break After 3 Days of Gains

After three days in the green, it was really no surprise to see the major indices take a step back on Tuesday as we move toward the Fed minutes tomorrow.   

The S&P is hanging onto 2900 by its fingernails after slipping 0.79% on Tuesday to 2900.51. Unfortunately, the NASDAQ couldn’t stay above 8,000 as it fell 0.68% (or about 54 points) to 7948.56. The Dow declined 0.66% (or around 173 points) to 25,962.44.

The major indices closed at their lows of the session and gave back much of yesterday’s advances as their three-day winning streak came to end. On Monday, each of them started the week with gains of 1% or more.  

However, tomorrow will be one week since the big Wednesday selloff that saw the Dow plunge by 800 points… and stocks have managed to recover a good amount of that deficit.  

Meanwhile, earnings season may be coming to an end, but there’s still a few heavy hitters waiting to report that could make some waves in the market.

For example, home improvement giant Home Depot reported better than expected earnings today. This provides more proof that the U.S. consumer continues to spend, though the company did warn that tariffs could be a problem moving forward. Shares were up 4.4% today.

Tomorrow we’ll get the report of another retailing powerhouse. Target reports before the market opens.

The big news on Wednesday may very well be the Fed minutes from the July meeting. Under normal circumstances, such a release would only be of mild interest to the market. However, investors consider anything the Fed does these days to be potentially important.

Plus, earnings season is almost over and there’s a lack of economic data being released in the coming days. So the tone of those minutes could be a big deal for the session.

But the minutes are technically the past, while the Jackson Hole Symposium is the future. Fed Chair Powell speaks on Friday, and, unless there’s a major headline or tweet, his comments could be the main event of the week.

Today's Portfolio Highlights:

Stocks Under $10: The portfolio has made a nice rebound from last Wednesday’s selloff and now Brian is looking to add some diversification. On Tuesday, he picked up Controlador Vuela (VLRS), a Zacks Rank #1 (Strong Buy) provider of aircraft transportation services. The company has beaten the Zacks Consensus Estimate for the past three quarters by triple digits each time, amassing an average surprise of more than 111% over the past four quarters. Brian also likes the valuation for this Mexican airline. He expects this stock to be on a lot of radar screens moving forward, so today was a good time to pick it up. The portfolio also sold Harmonic (HLIT) on Tuesday for a 14.6% return in less than two months. See the complete commentary for more.  

Blockchain Innovators: Payment providers are on the frontlines of the blockchain revolution, as these fintech companies waste no time in using the technology to improve their businesses. Case in point, QIWI (QIWI) has a whole subsidiary dubbed QIWI Blockchain Technologies, which is focused on the development of such solutions for internal and external services. Plus, rising earnings estimates has made QIWI a Zacks Rank #1 (Strong Buy). Dave added this stock on Tuesday as part of his goal to make a “leaner, meaner” portfolio, which included selling a couple underperforming names. Read the full write-up for more on today’s moves.

TAZR Trader: Last time Kevin wrote about being skeptical of a rally, he turned out to be right as stocks plunged 3% the following day. Well, he’s skeptical once again at the uptrend that started this week, though that doesn’t mean another epic selloff is coming tomorrow. However, it does mean that the editor wants to trim risk and raise cash in an uncertain environment where the market reacts violently to anything the Fed says or does. Therefore, the portfolio sold Smartsheet (SMAR) for a return of 27.8% in less than 5 months as this high-beta, mid-cap tech company may run into trouble if the NASDAQ 100 can’t break through. Read the full write-up for more on all of today’s moves. 

Insider Trader: Fears of a global recession and the grounding of the 737Max have made Wall Street skeptical of the transports. Shares of United Airlines Holdings (UAL) are down 10% over the past month amid all this concern. However, a director showed some support last week by buying 10,000 shares of his own company. Tracey considered that move to be a powerful signal, so she added UAL on Tuesday with a 10% allocation. The editor also appreciates that UAL is a Zacks Rank #2 (Buy) that is expected to grow earnings by 27.7% this year and 7.2% next. The portfolio still has cash on the sidelines for future purchases. See the full write-up for more on today’s buy.  

Zacks Short List: The portfolio swapped out two names in this week's adjustment. It short-covered Baidu (BIDU) and Newmont Mining Corp. (NEM), and then filled those spots by buying Qualcomm (QCOM) and Cheniere Energy (LNG). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Have a Good Evening,
Jim Giaquinto

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