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NASDAQ Drops More Than 2.5% to Begin Week

SPECIAL ALERT: Remember, the latest episode of the Zacks Ultimate Strategy Session will be available for viewing no later than this Wednesday, May 12. Kevin Matras, David Bartosiak, Dr. John Blank, Daniel Laboe and Sheraz Mian will cover the investment landscape from several angles in this informative event.

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▪ David and John Agree to Disagree on whether Cryptocurrencies remain a key building block in a FinTech future or whether leverage, momentum-buying and other forces distort prices
▪ Kevin answers your questions in Zacks Mailbag
▪ Sheraz and Daniel choose one portfolio to give feedback for improvement
▪ And much more

So be sure to mark your calendar then log on to Zacks.com and bookmark this page.


The new week began with a full-fledged tech selloff, which sent the NASDAQ lower by more than 2.5% and eventually pulled the other major indices off their record highs.

We’re coming back from one of the biggest misses in the history of the Government Employment Situation report. The market was expecting over a million new jobs… but only got 266K!  

And yet, investors were fine with it. They considered it a “bad news is good news” headline that suggested rates would stay super low for the foreseeable future. Obviously such an epic miss would allay investor concerns of rising inflation for at least a few days. Right?

Wrong!

The NASDAQ plunged 2.55% (or about 350 points) to 13,401.86 on Monday, which was its first drop of more than 2% since March 24. Tech has been under pressure for a while now as investors are shunning growth stocks amid rising prices and a reopening economy. This index slipped 1.5% last week, while its counterparts rose and set new records.

Big Tech got shellacked, as you might expect. All of the FAANGs were solidly lower, especially Facebook (FB, -4.1%). Meanwhile, Amazon (AMZN) and Netflix (NFLX) were each down by more than 3%, while Apple (AAPL) and Alphabet (GOOG) dipped more than 2%. Microsoft (MSFT) also dropped over 2%.

The Dow moved 300 points further into record territory on Monday, but the tech whirlpool eventually took its toll. A late plunge pulled the index lower by 0.10% (or just about 35 points) to 34,742.82. The S&P, which also closed at a new record on Friday, dropped 1.04% to 4188.43.  

The Colonial Pipeline ransomware attack didn’t help matters on Monday either. The country’s largest fuel pipeline was closed over the weekend and will probably not be able to fully restore service until the end of the week.

Earnings were certainly overshadowed today, but there’s still some big reports coming in the days ahead. Thursday will be an especially busy session as Alibaba (BABA) and Disney (DIS) are expected to come to the plate. BABA will be before the open and DIS will come after close.

Today's Portfolio Highlights:

Headline Trader: The recent quarterly report from Volkswagen (VWAGY) is more than enough reason for Dan to add this company to the portfolio. The largest automobile manufacturer in Europe recently announced “massive” beats on the top and bottom lines while also raising its guidance for 2021. But as great as that is, the editor is most excited with VWAGY’s “robust” positioning in the EV revolution. In fact, Dan thinks this company could be the biggest competitor to Tesla (TSLA) in the coming year with the business projecting 1 million EVs annually by 2023 and 1.5 million by 2025. This Zacks Rank #2 (Buy) trades at a relative P/E discount to its peers and seems poised to bounce back strongly from the pullback that started in March. Read a lot more about this new addition in the complete commentary.

Surprise Trader: After beating the Zacks Consensus Estimate for five straight quarters now, Dave clearly sees potential in National Vision (EYE). This Zacks Rank #2 (Buy) is one of the country’s leading and rapidly-growing optical retailers. It has a positive Earnings ESP heading into its quarterly report before the bell on Thursday. The editor added EYE on Monday with a 12.5% allocation, while also selling Polaris (PII) for a slight loss. Learn more in the complete commentary.

TAZR Trader: One of the big stories this earnings season is how good reports have often failed to send stocks higher. The Trade Desk (TTD) is the most recent example. This digital-advertising platform operator just beat the Zacks Consensus Estimates on both the top and bottom lines, while also announcing a 10-for-1 stock split. So what was the market’s reaction? Shares of TTD plunged 26%. And what was Kevin’s reaction? Buy more TTD! He originally bought the stock back in early March and now plans to take full advantage of this bargain. Make sure to read his complete commentary for more.

ETF Investor: Inflation is on the rise... and so too are prices from consumer companies as they grapple with supply shortages and logistical disruptions. Therefore, Neena added a position on Monday that will benefit from this environment. The editor picked up Horizon Kinetics Inflation Beneficiaries ETF (INFL), which has already gathered more than $330 million in assets since launching in January. INFL is an actively-managed ETF that holds companies expected to benefit from rising prices of real assets. In other words, these are companies that should see their revenue advance as inflation does. Neena also sold iShares Global Clean Energy ETF (ICLN) today. Read the full write-up for more on today’s moves.

Healthcare Innovators: The portfolio did some spring cleaning on Monday by getting out of five underperformers. One of the stocks that left today was genomic diagnostics company Invitae (NVTA), which Kevin immediately replaced with the addition of Pacific Biosciences (PACB) from the same space. More specifically, PACB develops, manufactures and markets sequencing systems, which help in studying synthesis, composition, structure and regulation of DNA. Read the complete commentary for a lot more on all of today’s action.

Black Box Trader: It's nearly a whole new portfolio on Monday as this week's adjustment replaced eight of ten names. Best of all though, ALL eight of the sells are positive... and three of them are double-digit winners! Those stocks leaving the portfolio today were:

• Domtar Corp. (UFS, +19.4%)
• Nucor (NUE, +19.2%)
• Tenet Healthcare (THC, +17.3%)
• Dow (DOW, +8.4%)
• KB Home (KBH, +5%)
• Olin Corp. (OLN, +3.3%)
• Graphic Packaging (GPK, +3.5%)
• KBR, Inc. (KBR, +2.7%)

The new buys that filled these open spots were:

• Bloomin Brands (BLMN)
• CNH Industrial N.V. (CNHI)
• CommScope Holding Co. (COMM)
• Fluor Corp. (FLR)
• Kohls Corp. (KSS)
• Marathon Petroleum (MPC)
• Stellantis N.V. (STLA)
• United Natural Foods (UNFI)

Read the Black Box Trader’s Guide to learn more about this computer-driven service.

Until Tomorrow,
Jim Giaquinto

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