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Chips Keep NASDAQ, S&P in the Green

Jim Giaquinto

The beaten-down semiconductors showed that they still have a pulse on Thursday. The space enjoyed one of its strongest sessions in years, keeping the NASDAQ and S&P on positive ground for another day.

The biggest jump came from Xilinx, which soared 18.4% after beating fiscal third quarter earnings and sales expectations.  We also saw double-digit jumps today from the likes of Lam Research (+15.7%), Teradyne (+12.9%) and Applied Materials (+10.2%). Texas Instruments chimed in with a 6.9% advance, while NVIDIA was up 5.7%.

Chip leader Intel rose 3.8% Thursday, but is down approximately 6.5% after hours, as of this writing, due to missing Q4 revenue expectations and offering a soft guidance for Q1. This report could have an impact on market action tomorrow.

During the session today though, the chips allowed the NASDAQ to improve 0.68% (or more than 47 points) to 7073.46. The S&P managed to inch forward by 0.14% to 2642.33.

The Dow, however, remains much more concerned with uncertainties like slowing global growth, the trade conflict with China and the government shutdown. Commerce Secretary Wilbur Ross stating that we are “miles and miles” away from a resolution certainly didn’t help at all. The index slipped 0.09% (or about 22 points) to 24,553.24, though it was off by well over 100 points earlier in the day.

Ever since the Christmas Eve selloff, stocks have moved sharply higher and recouped about half of the October to December 2018 correction. However, the major indices have suddenly gotten a lot choppier of late. As expected, earnings growth is a bit slower than in previous quarters, which seems to underscore the market’s overall concern of weaker growth around the globe. On the other hand though, the U.S. economy remains the envy of the rest of the world and this earnings season has still been solid enough to offset much of those other uncertainties.

And now we head into Friday with the market’s four-week winning streak in jeopardy. The major indices are down for this shortened week…but not by much. The NASDAQ and S&P are each off about 1%, while the Dow has slipped a little over 0.5%. Let’s hope for a strong close tomorrow!

Today's Portfolio Highlights:

Surprise Trader: The market had an underwhelming response to Brown & Brown’s (BRO) nearly 12% beat in its quarterly report from late October. But that was then and this is now. The market is feeling a lot better these days, so Dave expects more excitement this time around. Therefore, he added this Zacks Rank #2 (Buy) insurance company on Thursday with a 12.5% allocation. BRO has a positive Earnings ESP of more than 5% for the report coming after the bell on Monday. The editor also sold Shaw Communications (SJR) today for a 1.3% return in just about 2 weeks. Read the full write-up for more.

Stocks Under $10: The portfolio added Himax Technologies (HIMX) on Thursday, bringing the service just two positions shy of Brian Bolan’s ideal complement of 15 names. This Zacks Rank #2 (Buy) designs, develops and market’s semiconductors that are critical components of flat panel displays. The company is down quite a bit from recent highs, but today’s strong performance from semiconductors shows there’s still life in the space. Plus, it has a good-sized short interest, which is a factor recently used by Brian in his stock picking that has been very successful for the portfolio. Read the full write-up for a lot more on this new addition.

TAZR Trader: What a great day for the semiconductors! But Kevin warns that this is most likely just some short-covering and not an end to the semi cycle downturn. Therefore, he saw this bump as a good time to add more to the Direxion Semiconductor 3X Bear ETF (SOXS). Read his complete commentary for a lot more on this move.

Income Investor: "This week’s earnings reports were largely positive. As of this morning, 98 members of the S&P 500 had filed their latest results. Nearly 70% of those companies beat earnings estimates. About 60% posted better-than-expected sales figures. So far, earnings for the group are up 13% on almost 7% higher revenue. Growth is slowing, no doubt. But these rates are looking quite a bit better than initial estimates called for." -- Ryan McQueeney

Until Tomorrow,
Jim Giaquinto

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