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Banks Keep Stocks Moving Higher

Jim Giaquinto

Reports from the big banks were pretty good heading into Wednesday’s session, but the numbers from Goldman Sachs and Bank of America were at another level. Both stocks soared today after beating on the top and bottom lines, helping the market post a second straight day of gains.

The Dow advanced 0.59% (or about 141 points) to 24,207.16, while the S&P increased 0.22% to 2616.1. The NASDAQ was up 0.15% to 7,034.69. The indices did come off their highs of the session.

Shares of Goldman Sachs soared more than 9.5% today, while Bank of America jumped nearly 7.2%. We’ve already heard from the likes of Citigroup, JPMorgan and Wells Fargo (among others) earlier this week, but none of those stocks saw as dramatic a response to their numbers. Its Morgan Stanley’s turn at the plate tomorrow.

However, the focus of Thursday’s session will probably swing over to technology, as the first FAANG name is scheduled to report. Streaming giant Netflix was down nearly 1% on the eve of its big day, but that doesn’t sting so much since it was up 6.5% the day earlier. On Tuesday, the company increased its monthly membership prices, which the market obviously thought was a fantastic idea.

NFLX has beaten the Zacks Consensus Estimate for three straight quarters and has a positive Earnings ESP of 2% for tomorrow’s report.

The editors love the progress stocks have made since Christmas Eve, but they’re also being careful about moving forward. After recovering about half of the losses from the correction, some sort of much tamer pullback from these levels would be understandable. And we’re still dealing with uncertainties from the trade conflict with China and this partial government shutdown.

If earnings season continues to be solid, then the market’s sentiment should remain positive as we wait for Washington to get its act together. 

Today's Portfolio Highlights:

Home Run Investor:
The bears have had plenty of chances lately to turn the market back in their favor, but so far they have failed as buyers keep taking advantage of dips. Therefore, Brian Bolan is sticking with his aggressive stance of going after the shorts. On Wednesday, he picked up Alarm.com (ALRM), a Zacks Rank #1 (Strong Buy) provider of interactive security solutions for home and business owners. The company has beaten the Zacks Consensus Estimate for four straight quarters and amassed an average surprise of 27% in that time. It also has a 13% short interest position, which leaves lots of opportunity to squeeze out more profit. See the complete commentary for a lot more on this new addition.

Surprise Trader:
With all the volatility in the last quarter, Dave expects that an online brokerage like TD Ameritrade (AMTD) saw some growth in its transaction business. The company has a positive Earnings ESP for the report coming after the bell next Tuesday. Analysts are expecting earnings growth of 25% and revenue growth of more than 17% for the quarter. The editor thinks AMTD is set up for a beat, so he added it on Wednesday with a 12.5% allocation. He also sold SYNNEX (SNX) after the business process services company reported another positive surprise last week, securing a more than 14.5% return in less than 2 weeks. Read the full write-up for more on these moves and get ready for a lot more activity as earnings season heats up.

Large-Cap Trader: Now that we’ve seemed to stabilize from the late-2018 correction (for now), it’s time to take advantage of that severe pullback. On Wednesday, John added a couple of top picks that he didn’t even consider last year due to valuation concerns. But now, they’re a lot more affordable. The editor added Alphabet (GOOGL) and Archer Daniels Midland (ADM) with 5% allocations for each, bringing the portfolio near 100% long. These stocks have high Zacks Ranks, good valuations (of course) and are in solid industries. They will both report in early February as well. If this rally continues, then GOOGL and ADM should drive up with the market. Read the complete commentary for more specifics on these buys.

Counterstrike: The market has made some impressive gains since that Christmas Eve low and is now at a level where Jeremy wants to readjust a bit. The editor’s plan is to raise cash in case of any pullbacks into earnings, leading him to sell longer-term holding Coupa Software (COUP) for a nice 11.8% return. This stock has seen some “crazy volatility” during its time in the service, so Jeremy is taking this double-digit return while he can. NICE Ltd. (NICE) was sold today as well for a slight loss.

Meanwhile, he also added ProShares UltraPro Short QQQ (SQQQ) with a 6% allocation as a hedge against any upcoming selling, especially in front of this week’s big tech report from streaming giant Netflix tomorrow. Read the complete commentary for more on today’s moves and Jeremy’s outlook moving forward.

Income Investor: Analysts have pulled back on their 2019 earnings expectations for Johnson & Johnson (JNJ) since the talc powder scandal, sending the stock down to a Zacks Rank #4 (Sell). Ryan is looking to get out of some sell-ranked stocks right now, so it was finally time to exit JNJ while the portfolio could still get a nice 34.2% return. He also sold Chevron (CVX) as the stock has slipped to a Zacks Rank #5 (Strong Sell) on the sudden uncertainty in oil prices.

The editor is sticking with large-cap pharmaceuticals as a replacement by adding AbbVie (ABBV). This Zacks Rank #2 (Buy) has a dividend yield of 5% and held up quite well in December. Ryan sees it as a nice defensive position with an improving earnings outlook. He also added iShares Core High Dividend ETF (HDV) in order to “keep our skin in the game while also keeping things relatively safe”. Read the full write-up for more on these moves and get ready for tomorrow’s weekly report.

Have a Great Evening,
Jim Giaquinto

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