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Market Takes a Rest as Earnings Season Begins

The beginning of earnings season can be a nerve-wracking time for investors, so it’s as good a time as any for stocks to finally take a break after four days of solid gains.

The NASDAQ again outperformed its counterparts just as it did in the previous two sessions, but this time it had to do so from the negative side. The index was off only 0.10% (or about 12 points) to 11,863.90 today.

The Dow slipped 0.55% (or about 157 points) to 28,679.81, while the S&P declined 0.63% to 3511.93.

Earnings season unofficially started this morning with reports from financial bigwigs JPMorgan (JPM) and Citigroup (C), among many others. Both companies reported better-than-expected results, but you wouldn’t know it from the way their shares reacted.

JPM was down 1.62% today and C was off 4.8%.

It was also a rough day for Apple (AAPL), even though the company introduced its new iPhone 12 with 5G wireless connectivity. The stock was down 2.65% today, though it had gained over 6% on Monday.

Meanwhile, Amazon (AMZN) squeaked out a 0.02% advance on the first day of Prime Day, which means it was able to hold onto all of yesterday’s 4.75% rally.

It’s pretty impressive that the market had this four-day run while a new stimulus package remains up in the air… where it will probably stay until after the election. Earnings season adds even more uncertainty, so a time-out from the rally seems appropriate.

And it didn’t help that Johnson & Johnson (JNJ, -2.29%) and Eli Lilly (LLY, -2.85%) both had to pause their coronavirus vaccine trials amid complications. Such pauses are not uncommon in bringing a drug to market, but investors are very sensitive to any delays when it comes to fighting the pandemic.

Some of the big reports tomorrow include Bank of America (BAC), Goldman Sachs (GS), Wells Fargo (WFC), and U.S. Bancorp (USB).


Today's Portfolio Highlights:

Stocks Under $10: Takeover rumors made Surface Oncology (SURF) the best performer among all ZU services on Monday… but that was yesterday. Shares moved lower this morning, so Brian decided to cash in on the scuttlebutt and sell SURF for a 38% return in about a month-and-a-half. The editor’s new addition is in one of his favorite industries right now: building products. Tecnoglass (TGLS) manufacturers and sells architectural glass, windows and aluminum products for the residential and commercial construction industries. The company beat by 53% in its most recent quarter, which helped earnings estimates to rise. Brian likes its valuation, and appreciates that the topline and operating margins are moving in the right direction. Read the full write-up for more.

Surprise Trader: Today’s addition comes from a space in the Top 1% of the Zacks Industry Rank. The stock is Avnet (AVT) and the industry is Electronics – Parts Distribution. It’s one of the world’s largest distributors of electronic components and computer products. AVT crushed expectations last quarter by reporting 14 cents when the Zacks Consensus Estimate was only calling for a penny. And now, this Zacks Rank #1 (Strong Buy) has an Earnings ESP of 39.13% for a quarter that hasn’t been set yet, but usually comes around the second week of earnings season. Dave added AVT on Tuesday with a 12.5% allocation, while also selling Helen of Troy (HELE) for a 2.4% return. See the complete commentary for more on today’s moves.

Zacks Short Sell List: This week's adjustment replaced three names in the portfolio. The stocks that were short-covered included:

• XPO Logistics (XPO, +0.16%)
• The AZEK Co. (AZEK)
• The TJX Cos. (TJX)

The new buys that filled these positions were:

• Sociedad Quimica y Minera (SQM)
• TAL Education (TAL)
• The Trade Desk (TTD)  

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

Until Next Time,
Jim Giaquinto

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