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Consumers Staying Strong and Lifting Stocks

There was no repeat to last week’s Wednesday massacre, as the Fed minutes and strong results from a couple retailing giants helped the major indices to gains of nearly 1%.

The Dow advanced 0.93% (or about 240 points) to 26,202.73, while the NASDAQ reclaimed 8,000 with a rise of 0.90% (or around 71 points) to 8020.21. The S&P was up 0.82% to 2924.43.

Last Wednesday, each of those indices plunged about 3%, but the market has recovered a good amount of those losses since then.

The Fed minutes of the July meeting were released today and didn’t contain any surprises, which is a good thing. After cutting rates by a quarter point, Mr. Powell and Friends stated that this wasn’t the beginning of a long run of easing. So it pretty much echoed the Fed Chair’s ‘midcycle adjustment’ statement.

In other words, there was nothing in the minutes to change investors’ perceptions that another cut is coming next month.

Much more impactful on Wednesday were results from a couple of major retailers, which reiterated the strength of the U.S. consumer right now.

Shares of discount retailer Target soared more than 20% today after strong quarterly results, including same-store sales of 3.4% that blew past expectations of less than 3%. Likewise, home improvement retailer Lowe’s jumped over 10% on its own solid results.

These numbers come after similarly impressive results from the country’s leading retailer Walmart and Home Depot.

And we’re not done with the Fed this week. The Jackson Hole Symposium, which has been on the market’s mind for over a week now, actually gets started tomorrow with Mr. Powell scheduled to speak on Friday.

It looks like this week might be saving the biggest story for last. Thus far, the major indices are up through Wednesday, putting the market in a good place to break its three-week losing streak if Mr. Powell cooperates… and if no headline or tweet plays spoiler.

Today's Portfolio Highlights:

Insider Trader: While we’ve had some good reports from retailing giants like Walmart, Home Depot and Target; the outlet malls aren’t in as good a shape. In fact, Tracey went so far as to say its “a really hated sector”. However, she noticed some insider activity at Tanger Factory Outlets (SKT), a REIT that owns 39 upscale outlet malls. Shares are down 42% over the last year, but the CEO and a director both bought shares earlier this week. And as a REIT, it pays out its earnings to shareholders through a dividend yielding 9.9% and its also in the midst of a buyback plan. The editor considers this a risky play since shares of SKT could go lower, which is why she added the name on Wednesday with a smaller 5% allocation. Read the full write-up for a lot more on this new buy.   

Home Run Investor: The chart for automotive/trucking play Wabash National Corp. (WNC) had its ups and downs lately, but Brian thinks this Zacks Rank #1 (Strong Buy) could be ready for a rebound if the market continues to strengthen. The company is one of the leading manufacturers of semi-trailers in North America and adds some diversification to the portfolio. WNC beat earnings and revenue expectations in its recent report and earnings estimates are on the rise, but the editor really likes its valuation with an 8x forward earnings multiple. Read the full write-up for more on this new buy.

Surprise Trader: The last time Bank of Nova Scotia (BNS) was in an earnings ditch was 2016, when a strong quarterly report turned the tide and sent the stock higher. Well, Dave thinks history could repeat itself with this Zacks Rank #2 (Buy) foreign bank, as it has a positive Earnings ESP for the quarter coming before the bell on Tuesday, August 27. The editor also likes its ‘handsome” dividend. He added BNS on Wednesday with a 12.5% allocation and sold the underperforming Victory Capital (VCTR) to make room. Read the complete commentary for more. By the way, this portfolio easily had the best performance of the day among all the portfolios as Target (TGT) took off by more than 20% after reporting a strong quarter.

Until Tomorrow,
Jim Giaquinto

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