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Stocks Can't Follow Through on Recent Rally

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The NASDAQ gave back more than half of yesterday’s rally in Tuesday’s session, as tech again came under pressure and kept stocks from adding onto recent gains.

What a boring session this was compared to Monday! As we got back to work yesterday, investors were greeted by a new single dose covid vaccine from Johnson & Johnson (JNJ) and news that the $1.9 Trillion stimulus plan got through one chamber of Congress.

But there wasn’t much going on today. We did get a strong fourth-quarter report from retail giant Target (TGT), which beat on both the top and bottom lines. However, as is par for the course this earnings season, shares dropped by more than 6%. Investors may have been disappointed with the lack of a 2021 guidance. Shares are up slightly after hours, as of this writing.

Another bit of good news was the 10-year Treasury yield finishing below 1.5% for a third straight session. It’s surge past 1.6% last Thursday took a big toll on the market as investors worry about the impact of rising rates on the economic recovery and the Fed’s super accommodative stance.

However, the market shrugged everything off and decided to take a break following the best day of 2021 so far.

The NASDAQ dropped 1.69% (or about 230 points) to 13.358.79. This decline is far from the steepest for the index this year, but it was still disappointing since it spoiled more than half of yesterday’s 3% surge.

Facebook (FB) and Apple (AAPL) were each down by more than 2%, while Amazon (AMZN) and Microsoft (MSFT) were off by over 1%. Tesla (TSLA) slipped 4.4%.

Meanwhile, the S&P declined 0.81% to 3870.29, while the Dow was off 0.46% (or about 144 points) to 31,391.52. These indices were up 2.38% and 1.95%, respectively, yesterday.

In addition to the continuation of earnings season, the rest of this week will also see some big economic reports. ADP employment will be released tomorrow. Last month’s report was pretty solid with private payrolls adding 174K jobs, which was three times better than expectations.

Of course, the major jobs report comes from the BLS on Friday.

Today's Portfolio Highlights:

Stocks Under $10: Our homes are getting smarter and smarter these days thanks to companies like Arlo Technologies (ARLO). This Zacks Rank #2 (Buy) uses AI capabilities to deliver a seamless, smart home experience. The company has benefited from people upgrading their homes during this pandemic. ARLO has beaten the Zacks Consensus Estimate in each of the last four reports with an average surprise of 36%, but Brian was most impressed that the earnings surprises have been increasing over that time. Earnings estimates for this year have moved sharply higher over the past week and its valuation “isn’t that bad” either. The editor added ARLO on Tuesday, while also getting out of Fluidigm Corp. (FLDM) after the company was “brutalized” over the past week. Read the full write-up for more on today’s action.

Surprise Trader: Who doesn’t love ‘Taco Tuesday’? Dave is certainly a big fan, and now he’s putting his portfolio where his stomach is by adding Del Taco (TACO), the country’s second largest Mexican-American quick service restaurant. The company has beaten the Zacks Consensus Estimate for three straight quarters now, including a positive surprise of 60% last time. TACO has a positive Earnings ESP of 18.52% heading into the next report after the bell on Monday, March 8. Dave added the stock on Tuesday with a 12.5% allocation, while also getting out of the disappointing Brigham Minerals (MNRL) position. Read the full write-up for more on today’s moves.  

Zacks Short Sell List: The portfolio only swapped out one position in this week’s adjustment, but the change brought a nice double-digit return. The service short-covered Viasat (VSAT) for an 11.8% profit in just two weeks, and then filled the open spot by adding BioMarin Pharmaceuticals (BMRN). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

Until Tomorrow,
Jim Giaquinto

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