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Stocks Turn Sharp Plunge into Modest Selloff

Stocks dropped sharply this afternoon from all-time highs, but recovered enough in the latter half of the session to keep hope alive for another weekly gain. 

Everything was moving along just fine this morning, and then the bottom dropped out of the market and the Dow plunged by nearly 400 points at warp speed. 

The other major indices followed suit and we suddenly found ourselves in the throes of a sharp selloff of more than 1%. 

So what could have happened? Maybe the market shrugging off coronavirus concerns finally caught up with us. The sickness is still a wild card even if China is reporting fewer infections… and yet stocks keep making new highs. 

Or maybe Commodity Innovators editor Jeremy Mullin put it best when he said: “Let’s remember, there doesn’t have to be a reason to go lower, we just need more selling than buying. When it intensified, the dominos fell and a big spike lower took out any buy the dippers.” 

Regardless of what happened, the bigger news is that stocks had a nice bounce back that turned a major plunge into a modest selloff. 

The Dow ended lower by “only” 0.44% (or about 128 points) to 29,219.98. The index surged more than 250 points from its low of the session, which briefly took it below 29,000. 

The NASDAQ dipped 0.67% (or around 66 points) to 9750.96 and the S&P was off 0.38% to 3373.23. As with the Dow, these indices dropped more than 1% at their lows as well. 

While the NASDAQ may have had the worst performance today, it’s still the only major index heading into Friday’s session with a gain for the week. The S&P is only about 7 points from being positive for the week, but the Dow is about 178 away. 

Stocks will be going for a third straight week in the green tomorrow. The big problem, though, is that investors have been extremely hesitant to get involved on Fridays during this coronavirus outbreak. Let's see what happens...

Today's Portfolio Highlights:

Large-Cap Trader: The portfolio banked three double-digit returns on Thursday as John did a little redecorating and swapped out a few positions. The biggest winner was Biogen (BIIB), which brought a return of 41.7% in about 6 months. Entegris (ENTG) and AmerisourceBergen (ABC) were also cashed out for profits of 19.8% and 17.5%, respectively. 

The editor wasted no time in taking that cash and evenly distributing it among these three positions:

• Mellanox Technologies (MLNX)
• Hubbell (HUBB)
• Brunswick (BC)

These companies do very different things, but they all have solid Zacks Ranks, are in highly-ranked industries, and beat the Zacks Consensus Estimate in their recent quarters. They also have average positive surprises over the last four quarters. The allocation will be about 6% to 7% for each. Make sure to read John’s complete commentary for a lot more on today’s moves. 

Counterstrike: Shares of YETI Holdings (YETI) pulled back despite a strong quarterly report. Apparently, the guidance from this popular outdoor & recreation products retailer wasn’t good enough for a stock that doubled last year. The reaction caught Jeremy’s attention, but he decided to get involved when YETI held above a recent secondary at $32. With a bullish trendline in the chart, the editor added the stock on Thursday with a 10% allocation. But that’s not all! He also sold The Rubicon Project (RUBI) for a 47% return and half of HealthEquity (HQY) for a 29.5% profit. Read the complete commentary for a lot more on today’s moves, including a look at YETI’s chart.

Surprise Trader: The housing market is looking pretty good these days, so Dave decided to buy BMC Stock Holdings (BMCH) on Thursday with a 12.5% allocation. This Zacks Rank #2 (Buy) provides diversified building products and services to professional builders and contractors primarily in the residential housing market. BMCH beat by 7.4% last time, and it currently has an Earnings ESP of 7.04% for the quarter coming before the bell on Thursday, February 27. The editor also sold Bloomin’ Brands (BLMN). Read the full write-up for more on today’s moves.

Technology Innovators: This portfolio heads into the weekend fully invested after today’s addition of Everi Holdings (EVRI), a Zacks Rank #2 (Buy) payment processing company that is tied into the casinos. Over the past four quarters, it has beaten three times and met once. The next report is on March 2 with the market expecting 8 cents per share on revenue of $132 million. Brian was especially pleased with margins improving to 3.5% from 2.1%. “Topline growth and margin improvement mean big jumps in EPS… and that often leads to nice beats,” said the editor. Read the full write-up for more.

All the Best,
Jim Giaquinto

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