Banks Keep Dow in the Green While the Rest Stumble

Stocks were a bit groggy on Monday after a strong performance last week, but the Dow still managed to keep the good times going thanks to the big banks.

The index closed at its high of the session, though that only marked a gain of 0.18% (or nearly 45 points) to 25,064.4. Help came from the likes of JPMorgan (+3.97%) and Bank of America (+4.31%), which reported solid quarters on Friday and today, respectively. The big banks kicked off earnings season last week.

But that was all the good news when it came to the indices. The S&P declined by 0.10% to 2798.4, finishing below 2800 after having reached that mark on Friday for the first time since February. The NASDAQ was off 0.26% to 7805.7, breaking two straight days of all-time highs. The indices are coming off an impressive week that saw each of the Big 3 jump by 1.5% or more.

The biggest news of the day, though, didn’t come until after the market closed. Netflix became the first of the FANG stocks to report after the bell, and the street didn't like what it had to say. The streaming giant fell well short of its subscriber expectations, adding 5.15 million subscribers instead of over 6 million. Revenue was also less than expected.

As of this writing, shares of NFLX are down about 14% after hours. It’ll be interesting to see what kind of impact this has on stocks tomorrow.

As for today in the portfolios, the editors were a little sluggish themselves. Friday was a very busy session, but on Monday only three portfolios made moves. Of course, one of them was Surprise Trader, which added for the sixth time in six days as Dave plans to take full advantage of what’s expected to be a strong earnings season. Meanwhile, Stocks Under $10 picked up a natural gas play while Black Box Trader swapped five names. Learn all about these moves and more in the highlights section below:

Today's Portfolio Highlights:

Surprise Trader: It’s Monday and its earnings season…so it’s time for the portfolio to get back to buying! Dave picked up Hersha Hospitality Trust (HT), a Zacks Rank #1 (Strong Buy) that owns, operates and develops a portfolio of hotels and assisted living facilities. The company has a positive Earnings ESP for the quarter being reported on Tuesday, July 24, and shares have been known to move sharply higher on good news. The editor is getting on board now with a 12.5% allocation. Read the full write-up for more.

Stocks Under $10: We are about two weeks away from the early August earnings report for Chesapeake Energy (CHK), a natural gas play that has beaten the Zacks Consensus Estimate in each of the past four quarters. Even more impressively, it has amassed an average beat of more than 26% in that time. The company has a positive Earnings ESP and a really good valuation, so Brian Bolan though this would be a great addition to the portfolio. The full write-up has more specifics on this new pick. By the way, the editor plans to make another buy tomorrow as he pushes the portfolio past the previous limit of 15 positions to between 17 and 20.

Black Box Trader: Half of the portfolio was swapped out in this week’s adjustment. These stocks were sold on Monday:

• HD Supply Holdings (HDS, +2.4%)
• Assurant Inc. (AIZ, +2.1%)
• Delek US Holdings (DK)
• Rent-A-Center (RCII)
• Restoration Hardware (RH)

The new buys that replaced these names are:

• CVS Health (CVS)
• Expeditors Intl (EXPD)
• Turtle Beach (HEAR)
• Cheniere Energy (LNG)
• ONEOK Inc. (OKE)

Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.

Zacks Confidential: It’s been a wild first half to 2018, as stocks started strong out of the gate but seemed to hit a wall shortly thereafter on fears of higher rates and tariffs. As the half came to an end though, the market found its footing again with the major indices either reaching new highs or nearing them. What does the second half have in store for us? That’s exactly what Kevin wants Jeremy Mullin to answer in this week’s Zacks Confidential. Read his first half review and second half preview, along with three stocks to buy and hold until Christmas: The 2018 Roller Coaster Belongs to the Bulls.

All the Best,
Jim Giaquinto

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