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Tech Stocks Lead Market Higher to Begin Short Week

A rested market returned from the three-day weekend on Tuesday and posted solid gains, amid hopes for more stimulus and ahead of the first FAANG report of the earnings season.

Tech stocks led the way and helped the NASDAQ jump 1.53% (or nearly 200 points) to 13,197.18.

All of the FAANGs were higher, especially Facebook (FB, +3.87%) and Alphabet (GOOG, +3.15%). The big news came after the bell, though, when Netflix (NFLX) reported fourth-quarter results.

The streaming pioneer – and first FAANG report of the season – actually missed earnings with in-line revenues. However, global additions of paid subscribers soared past expectations at 8.5 million. The company is also thinking about stock buybacks and could see free cash flow this year.

As of this writing, shares of NFLX are up 11.6% afterhours.

Meanwhile, the S&P rose 0.81% to 3798.91 and the Dow increased 0.38% (or about 116 points) to 30,930.52.

Stocks are coming back from their first weekly loss of 2021. The NASDAQ and S&P slipped 1.6% and 1.5%, respectively, last week, while the Dow was off 0.9%.

The major news of the day came from former Fed Chair and incoming Treasury Secretary Janet Yellen, who said that Congress should “go big” with further stimulus at a hearing in front of the Senate Finance Committee.

This is exactly what investors want to hear and exactly what they expect from a government that’s now controlled by Democrats (if only barely).

It was only a few days ago when President-Elect Joe Biden, who will be inaugurated tomorrow, outlined a $1.9 trillion package, which includes $1400 direct payments, more federal unemployment benefits, help for local governments, and more.  

Elsewhere on Tuesday, the big banks continued to report here in the early days of earnings season. Goldman Sachs (GS, -2.26%) beat on both top and bottom lines, while Bank of America (BAC, -0.73%) missed revenues.

As you can see, both stocks moved lower afterwards, just like JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) after their reports on Friday.

Today's Portfolio Highlights:

Surprise Trader: Every once and a while, Dave likes to add a large-cap name that he feels good about. You don’t get much bigger in the rail transportation space than CSX (CSX). The company topped the Zacks Consensus Estimate in 17 of the past 19 quarters, and now has a positive Earnings ESP for the quarter coming after the bell on Thursday, January 21. The editor added CSX on Tuesday with a 12.5% allocation, while also selling Altra Industrial (AIMC) for a 37.5% return in just over three months. Read the full write-up for more.

Stocks Under $10: The portfolio increased exposure to the oil patch yet again on Tuesday, but this time Brian went overseas for the addition. He picked up Vermilion Energy (VET), an oil & gas name with more exposure to Europe than the U.S. The company topped the Zacks Consensus Estimate in three of the past four quarters. Analysts are still expecting losses for 2020 and 2021, but those deficits have been narrowing so much that VET is now a Zacks Rank #2 (Buy). “A recovery from the pandemic will be just what the doctor ordered for this stock,” said the editor. Meanwhile, the service cut ties with Fluidigm (FLDM) today for a small loss, as the medical instruments play has been flatlining since being added about a month ago. Read the full write-up for more on today’s action. Also, Cassava Sciences (SAVA) was a top performer among all ZU names on Tuesday by climbing 22.7%.

It looked like Jeremy had missed his chance to buy BJs Wholesale Club (BJ) after the operator of warehouse clubs raced past its December highs. But now the stock has returned to its 50-day. The editor isn’t letting this one pass by again, so he added BJ on Tuesday with an 8% allocation. The stock has been consolidating for three months and Jeremy thinks it might be “ready to go”. The portfolio also sold half of (STMP) for a 6.4% advance in a little over a month and short-covered Beyond Meat (BYND) for a slight loss. Read the complete commentary for more, including all the technical stuff on BJ. By the way, this portfolio had one of the best performers today as BlackBerry (BB) jumped 25.51%.

Marijuana Innovators: It’s time to say goodbye to one of this portfolio’s inaugural picks. Innovative Industrial Properties (IIPR) is a REIT that’s focused on medical-use cannabis facilities. Dave added it when the service started back in March 2019 and feels the “easy” money has been made in the name. It was sold on Tuesday for a nice 148.8% return. The editor will explain fully in tonight’s commentary, so make sure to check it out. 

TAZR Trader: Since buying Alibaba (BABA) back in May, Kevin has sold part of his position in the Chinese e-commerce giant twice for double-digit returns both times. On Tuesday, he sold the portfolio’s remaining position.. and once again he collected a double-digit profit. This time it was 27.8%. The editor has four reasons why he’s getting out of BABA right now, including the stock slipping to a Zacks Rank #4 (Sell) and good news being priced into the name. Now he thinks there’s a good chance the stock re-tests $210-$220 before the next upleg. Read the complete commentary for specifics on all of those four reasons, as well as updates on encouraging details for several of the portfolio’s positions. Meanwhile, this service had a top performer on Tuesday with Inseego (INSG) jumping 23.5%.

Zacks Short Sell List:
This week's adjustment included only two changes for the portfolio. We short-covered Sunrun (RUN, +5.9%) and NeoGenomics (NEO), and then filled those open positions by adding Etsy (ETSY) and GoodRx Holdings (GDRX). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

Black Box Trader: Half of the portfolio was replaced in this week's adjustment, which comes a day later than usual due to the market being closed on MLK Day. The stocks that were sold today included:

• ExxonMobil (XOM, +18.3%)
• Jabil (JBL, +0.94%)
• Olin (OLN)
• Huntsman (HUN)
• Owens & Minor (OMI)

The new buys that filled these open spots were:

• Cleveland-Cliffs (CLF)
• Mattel (MAT)
• Navient (NAVI)
• AES Corp. (AES)  

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

All the Best,
Jim Giaquinto

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