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Mixed Session as Fed, Earnings Compete For Market’s Attention

We’re in the thick of big tech earnings right now and also had to deal with a Fed statement on Wednesday, so it’s no surprise that today’s session saw an indecisive, choppy and ultimately mixed performance.

The NASDAQ, which plunged over 1.2% yesterday, rebounded by 0.70% (or about 102 points) to 14,762.58. The S&P pretty much broke even, though it was technically down by 0.02% to 4400.64. The Dow slipped 0.36% (or about 127 points) to 34,930.93. The indices were at record highs on Monday with a five-day winning streak, before pulling back on Tuesday.

The major news today was the Fed statement after its two-day policy meeting. For the most part, Chair Jerome Powell stayed dovish, admitting that the economy is getting stronger but is still a ways off from the goals that would require a change in policy. They’re not too concerned about the delta variant and will remain patient for now. In other words, it’s just what the market wanted to hear.

“Powell did a great job at telling the market to expect tapering while at the same time saying it is not imminent,” said Dan Laboe in Headline Trader. “He wants the market to have fully discounted or even over discounted the Fed's tapering plan before it's announced. Powell has proven an exceptional ability to provide smooth monetary lift-off, with no shocks to any asset class.”

Meanwhile, this solid earnings season continues, even if the market remains stubborn and refuses to reward strong results. Last night, Alphabet (GOOGL), Microsoft (MSFT) and Apple (AAPL) each reported impressive quarterly results that beat on both the top and bottom lines by double digits. GOOGL was up more than 3% on Wednesday, but the other two were still in the red. AAPL was down more than 1%.

The FAANG caravan continued on Wednesday with social media pioneer Facebook (FB) reporting after the close. Its second-quarter results continued the above-mentioned trend, as earnings beat the Zacks Consensus Estimate by 19% while revenues soared 56%. However, it warned that growth could slow in the quarters ahead. Shares of FB are down nearly 4% afterhours, as of this writing.

The final FAANG of the season comes to the plate tomorrow when e-commerce giant Amazon (AMZN) reports after the bell. Other names scheduled for tomorrow include Mastercard (MA), Comcast (CMCSA), Merck (MRK), T-Mobile (TMUS) and hundreds more.

Today's Portfolio Highlights:

Options Trader: The premium for the October 105.00 Call in Floor & Décor (FND) has doubled, so you know what that means. It’s time for Kevin to pull profits and reposition into a new option with the original dollars committed. Therefore, he sold to close the Oct 105.00 for a nearly 128% return and then bought to open an October 120.00 Call in FND. Now the principal is protected, while the position can continue making profits. Meanwhile, the editor also bought to open a November 120.00 Call in Akamai Technologies (AKAM), a leading global services provider for accelerating content and business processes online. The company has a fantastic history of beating the Zacks Consensus Estimate, which it will likely do again when it reports on August 3. Kevin thinks the stock is attempting to break out of a 2-month long base... and maybe even a larger 12-month base. Read the full write-up for more specifics on all of today’s moves.  

TAZR Trader: Sales are just beginning to grow at Luminar Technologies (LAZR), a provider of light detection and ranging (LIDAR) technologies for autonomous vehicle platforms. Basically, these sensors help self-driving cars gain a three-dimensional view of the road by boomeranging lasers from all directions. The technology will be standard equipment on the fully electric Volvo sedan due out next year. This Zacks Rank #2 (Buy) also made a key acquisition by buying OptoGration, a chip design partner and manufacturer that’s a key part of its supply chain. Kevin started a small 5% position in LAZR on Wednesday. Read the full write-up for a lot more on this new addition.

Home Run Investor: The portfolio filled an empty spot on Wednesday by adding Open Lending Corporation (LPRO), which ensures profitable auto loan portfolios for financial institutions. More specifically, it offers loan analytics, risk-based pricing, risk modeling and default insurance. This Zacks Rank #2 (Buy) had 152% growth in the most recent quarter, which means it’s on track for nearly 100% growth this year. Analysts expect 37% growth next year. Brian believes that small improvements in gross margins and operating margins would have a significant impact on EPS moving forward. Read the complete commentary for more on today’s addition.

Surprise Trader: Exposure to the chip space during this shortage sounds like a good idea to Dave, which is why he added Veeco Instruments (VECO) on Wednesday. This Zacks Rank #2 (Buy) is engaged in the design, development, manufacture and support of thin film process equipment, which are primarily sold to make electronic devices. The company has beaten the Zacks Consensus Estimate in 16 of the last 17 quarters. The most recent surprise was 13.6%. Now it has a positive Earnings ESP for the quarter coming after the bell on Tuesday, August 3. The editor added VECO with a 12.5% allocation today, while also selling NextEra Energy (NEP) for a more than 4% return in just a little over a week. The complete commentary has more on today’s action.

Healthcare Innovators: The portfolio re-added two names on Wednesday that had been big winners in the past. Guardant Health (GH) is a premier oncology diagnostics company that has formed a nice support base while we wait for some important trial data. Meanwhile, Natera (NTRA) is a major player in non-invasive prenatal screening that Kevin thinks has more upside than downside after a strong quarterly report and successful secondary. This service cashed in a more than 83% profit in GH back in March and approximately 40% in NTRA back in August 2020. The editor is looking for more success in the future. Make sure to read the complete commentary for price targets on these buys. And one more thing, Kevin also sold Alnylam Pharmaceuticals (ALNY) for more than 28% in a little over 13 months.

Marijuana Innovators: It was a good day for marijuana stocks, which explains why this portfolio had two double-digit winners on Wednesday. The best performer was easily Tilray (TLRY) after soaring nearly 26% in the session even though its fiscal fourth quarter results fell short of expectations. This result marked the first report since its merger with Aphria closed in May. TLRY is the biggest winner in the portfolio right now with a surge of nearly 190% since being added in July 2020. In other news, Organigram Holdings (OGI) also made the Top 5 today by climbing just under 11%.

Until Tomorrow,
Jim Giaquinto

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