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Late Rally Snaps Market's Two-Day Skid

We saw another late move in the market on Thursday, but this time the action was to the upside and left all of the major indices higher for the session. The rally snapped a two-day losing streak for stocks.

The Dow was out front with a rise of 0.62% (or just under 200 points) to 32,619.48, while the S&P rose 0.52% to 3909.52. Even the NASDAQ joined the party by advancing 0.12% (or more than 15 points) to 12,977.68.

We heard yet again from Fed Chair Jerome Powell today. He spoke on Monday and then testified in front of Congress for the next two days. And he was back at it again this morning on NPR.

Mr. Powell reiterated that the economy is on the mend, but the Fed won’t be too quick to change policy amid the improvement. And they’ll make sure the market knows far ahead of time when they are switching gears.

However, the market’s kneejerk reaction to his comments were to move lower, perhaps because he talked a bit about rolling back the help once substantial progress has been made.

In the back of every investor’s mind, he or she knows that this super accommodative policy will have to end. But they don’t want to hear about it right now… especially from the Fed Chairman! Plus, there are plenty of investors out there that are concerned an overheated economy will force the Committee’s hand sooner than expected, regardless of what they say right now.

Fortunately, such concerns didn’t last the whole session, as stocks moved sharply higher after midday. The jobless claims report was probably a big help as it finally slipped below 700,000. Last week saw 684,000 claims, which was much better than the 735K expected and nearly 100K better than last week. And it didn’t hurt to see the 10-year Treasury yield remain well below 1.7% for a fourth straight day.

Two of the major indices have a pretty good chance of finishing higher for the week. The Dow and S&P are each down by less than 10 points heading into Friday. But the poor old NASDAQ is off approximately 1.9% over the past four days, which is what happens when you drop more than 3% in two sessions as money moves out of tech. Let’s see what happens tomorrow...

Today's Portfolio Highlights:

Home Run Investor: The market is clearly “out of sync” right now, so Brian thinks it’s time to get a bit more defensive by protecting some gains and reducing the number of positions in the portfolio. He made such moves across all his services on Thursday. Dynatrace (DT) was added back in November 2019, but the editor thinks this software intelligence company has run its course. Brian sold it on Thursday for a 128% return, while also cutting the underperforming AudioCodes (AUDC) and Kulicke and Soffa (KLIC) positions. See the complete commentary for more.

Counterstrike: Recent earnings and price action has been very positive for Groupon (GRPN). Shares of this voucher company surged to $64 after beating fourth-quarter earnings expectations by 383%! However, it has fallen 30% since then, which has set up a classic Counterstrike play for Jeremy. The editor added GRPN on Thursday with a 6% allocation and is preparing for a rally back above $50. Meanwhile, the short of The RealReal (REAL) turned out exactly as Jeremy planned with a nice double-digit winner in just a little over a week. He short covered REAL today for a 12.6% return. Read the full write-up for more on these moves.

Stocks Under $10: As part of his more defensive strategy, Brian decided to protect his big win in Liquidity Services (LQDT) by selling this provider of e-commerce marketplace solutions on Thursday for a solid 100.6% return in less than six months. He also sold Mogo (MOGO) and Full House Resorts (FLL), which were newcomers to the portfolio but hadn’t been performing well. Get more specifics in the complete commentary.

TAZR Trader: Last Thursday, Kevin sold Magnite (MGNI) for a more than 25% return in less than two weeks! Today, he added this stock once again with a 5% allocation. MGNI is a Zacks Rank #2 provider of a sell-side advertising platform. The company should benefit from Google’s decision to stop targeting ads from a user’s browsing history. Read the complete commentary for more on this move.

Technology Innovators: The valuation for Axcelis Technologies (ACLS) is among the “stiffest” in the portfolio, which is something that Brian doesn’t want to worry about in his more defensive attitude. He sold this semiconductor equipment company on Thursday to protect its more than 47% return. The stock had been in the portfolio for a little more than four months. Meanwhile, Iridium Communications (IRDM) and Covetrus (CVET) were both added this month, but have underperformed. The editor would rather cut small losses than big ones, so he got out of both names today. See the full write-up for more.

Healthcare Innovators: Guess who’s joining the S&P MidCap 400 Index? It’s Neurocrine Biosciences (NBIX)! Shares of the neuroscience-based company jumped 11.1% on Thursday to become the top performer among all ZU portfolios. But it wasn’t alone. Axcella Health (AXLA) rose 11% and Oncternal Therapeutics (ONCT) advanced 7.8%, which means this service had three of the top five winners on Thursday.  

All the Best,
Jim Giaquinto

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