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Stocks Slip Again on Oil Prices

Stocks have now dipped about 5% to start this week, as the indices declined for a second straight session amid a drop in oil prices.

Of course, it should be mentioned that stocks had been on an amazing run prior to this week that brought them halfway back from the epic bear market run brought on by the coronavirus.

In other words, relief rallies don’t last forever and we were due for some pullback.

The NASDAQ has been easily outperforming its counterparts, but there was a change of pace on Tuesday. The tech-heavy index actually led the market lower with a drop of 3.48% (or just under 300 points) to 8263.23.

Netflix (NFLX) will have a big say on what happens with the NASDAQ (and maybe the market in general) tomorrow. After the bell today, the streaming giant missed earnings but beat on revenue. However, the big news was that subscription adds blew past expectations to nearly 15.8 million, as people stuck in their homes look for ways to ward off cabin fever.

Shares of NFLX soared more than 10% immediately after the report, but quickly came back to earth and are slightly negative as this is being written.

The S&P slipped 3.07% to 2736.56 on Tuesday and the Dow declined 2.67% (or around 631 points) to 23,018.88.

The May oil contract was the biggest story on Monday as it plunged and actually finished negative. But it expired today positive by about $10 after bouncing back.

However, the June contract is now in trouble after dropping more than 35% as the industry deals with low demand and high supply during this economic shutdown.

Congress may finally be taking some action to help small businesses get by. The Senate agreed to a $484 billion relief package today that will also help fund hospitals and testing. After its approved, it will then move on to the House.

As we get into the middle of this week, earnings season and the price of oil will continue to be big factors in the market’s direction. Let’s see what tomorrow brings…

Today's Portfolio Highlights:

Surprise Trader: The portfolio’s addition for Tuesday was Biotelemetry (BEAT), a provider of ambulatory outpatient management solutions that hasn’t missed earnings expectations since late 2017. If the past couple of years is any guide, then this company should be reporting again in the last week of April. It has a positive Earnings ESP of 1.54%. Dave thinks there’s a good chance it surprises again, so he picked up BEAT with a 12.5% allocation. The portfolio also sold the underperforming BCB Bancorp (BCBP). Read the full write-up for more on today’s moves.

ETF Investor: It’s a fool’s errand to try and pick a winner out of the hundreds of biotech companies working on a coronavirus vaccine or treatment. But Neena has a solution. She thinks its better to invest in a broad healthcare and biotech ETF, which is why she picked up the iShares NASDAQ Biotechnology ETF (IBB) on Tuesday. The fund provides exposure to 211 such companies and has accounts under management of approximately $8 billion. Its top holdings include Gilead (GILD), Amgen (AMGN) and Regeneron (REGN). Read the full write-up for more on this new addition.

TAZR Trader: Now that we’ve had two days worth of declines, Kevin feels that we’re close enough to the top of this relief rally to make a move. Therefore, he bought Direxion S&P 500 3X Bear ETF (SPXS) on Tuesday. Read the full write-up for more on this move.   

Stocks Under $10: In the first of two additions this week, Brian added Tufin Software (TUFN) on Tuesday. This Zacks Rank #2 (Buy) is a security software company that provides a security policy management platform that brings automation and analytics to security and network operations. Read the complete commentary for a lot more on TUFN and be ready for another buy on Thursday as the editor pushes the portfolio to 15 names by May 1.

Zacks Short List: The portfolio cashed in a double-digit winner on Tuesday, along with three other names in this week’s adjustment. The names that were short-covered today included:

• Ryder System (R, +15.1%)
• Bright Horizons Family Solutions (BFAM, +6.3%)
• Cracker Barrel (CBRL)
• Guidewire Software (GWRE)

The new buys that filled these open spots were:

• China Lodging Group (HTHT)
• Marriott International (MAR)
• Trane Technologies (TT)
• Zimmer Biomet Holdings (ZBH)

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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