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S&P Snaps Five-Day Losing Streak as Stocks Rally Late

Well, that session sure did end a lot better than it began!

Stocks were in a full-fledged selloff this morning, but dovish testimony from Fed Chair Jerome Powell helped the major indices stage an impressive comeback that saw a long losing streak finally come to an end.  

Mr. Powell testified in front of the Senate Banking Committee today and pretty much said exactly what the market wanted to hear (which he’s been really good at lately). Basically, inflation and employment are still well below the Committee’s goals and will likely come up short for a while longer.

In other words, this super accommodative Fed isn’t changing the way it does business anytime soon. We can expect rates to remain near zero for the foreseeable future, as inflation will be allowed to run hotter and longer than usual before making any changes.

Investors had been growing nervous for the past few weeks about rising bond yields and inflation, which might convince the Fed to raise rates under more normal conditions. This anxiety led to a rather “blah” performance for stocks last week, including a five-day losing streak for the S&P.

But that finally changed on Tuesday.

The index snapped its skid by climbing 0.13% to 3881.37. The S&P hadn’t seen a positive close since Friday, February 12. The Dow rose 0.05% (or more than 15 points) to 31,537.35. These indices were both down by 1% or more earlier in the session.

The NASDAQ, which has been suffering from a rotation out of tech, seemed all set for a second straight epic decline of well over 2%. However, it too was swept up in the late-day rally and finished with a decline of only 0.50% (or about 67 points) to 13,465.20. It had plunged nearly 2.5% on Monday.

We’ll be hearing from Powell again tomorrow, as he’s scheduled to testify in front of the House Financial Services Committee. We’ll also be getting earnings reports from NVIDIA (NVDA), Lowe’s (LOW) and hundreds of other companies on Wednesday.

Today's Portfolio Highlights:

Stocks Under $10: The market is ripe for dip buying at the moment, which was the idea behind Brian’s addition of Fluidigm Corporation (FLDM) on Tuesday. This medical equipment manufacturer pulled back twice after missing earnings in its most recent report. However, the editor notes good movement in estimates for this year and some growth expected for next year as well. Plus, Brian remembers FLDM bringing a more than 49% return to the portfolio back in 2019. Speaking of pullbacks, Immersion (IMMR) has dropped sharply of late. The editor moved quickly to protect the remaining gain by selling the stock today for a return of nearly 40% in less than four months. Read the full write-up for a lot more on all of its today’s action.  

Insider Trader: Normally, we don't see a whole lot of big oil insiders buying shares. However, we aren’t in normal times! This space has been beaten down so much that insiders can’t help but get involved. Case in point, a director at Chevron (CVX) bought 3200 shares last week. The last insider to buy at this oil & gas giant was a different director back in November 2020. Tracey wouldn’t be surprised if we saw more oil insiders making moves as energy prices rise during the economic reopening. The editor added CVX on Tuesday with a 10% allocation after making room by selling Beazer (BZH) for a more than 20% profit in three months. See the complete commentary for a lot more on today’s moves.

TAZR Trader: Shares of BigCommerce (BIGC) dropped sharply on Tuesday despite its recent beat-and-raise quarter, which was exactly the opportunity Kevin was watching for. He added more of this software-as-a-service e-commerce platform today after it reported fourth-quarter revenue growth of 39% year over year and ARR (annual revenue run-rate) growth of 41%. Meanwhile, its revenue forecasts for this quarter and year were above expectations. The editor was further heartened by a BIGC bear reversing course and raising his price target. Meanwhile, the service took further advantage of this sluggish market by adding to Vaxart (VXRT) today and starting a 5% position in The Trade Desk (TTD). Read the full write-up for more on these moves.

Surprise Trader: The new buy on Tuesday was Resideo Technologies (REZI), which is part of the highly-ranked Security & Safety Services industry. The company will be going for a fifth straight positive surprise when it reports before the bell this Thursday. It has a positive Earnings ESP of 10.75% for the quarter. Dave added REZI today with a 12.5% allocation. The editor also “took the victory” on Triumph Group (TGI), which was sold for a nice 33% return in less than a month. See the full write-up for more.

Zacks Short Sell List: This week's adjustment includes a double-digit winner, as the portfolio swapped out three positions. The stocks that were short-covered today included:

• Arcturus Therapeutics (ARCT, +50.2%)
• China Lodging Group (HTHT, +6.5%)
• Aramark (ARMK)

The new additions that filled these open spots were:

• Intuit (INTU)
• Las Vegas Sands (LVS)
• Twitter (TWTR)

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

Headline Trader: "Jerome Powell spoke sweet words of a maintained long-term monetary stimulus to the Senate Banking Committee this morning, catalyzing a market rebound. Powell's cautious words of wisdom regarding the Federal Reserve's benchmark interest rate and balance sheet size were the reassurance the equity markets needed.

"Still, the markets may be in for a further correction despite the dovish note that Powell left us with. Yields will likely continue to rise as a robust recovery gets priced in. The bond yield velocity will dictate whether the valuation stretched tech is in for another retracement."
-- Daniel Laboe

Until Tomorrow,
Jim Giaquinto

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