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Don't Judge a Week by its Monday

Jim Giaquinto

The major indices just finished another negative week, but investors must be breathing a sigh of relief since the market mostly recovered from the worst session of the year on Monday. 

The Dow was off by 0.75% over the past 5 days, while the NASDAQ was down 0.6% and the S&P slipped 0.5%. 

Those results aren’t exactly pretty, but they’re much better looking than the losses on Monday after China allowed the yuan to drop to its lowest level against the dollar in 10 years. 

The move was a retaliation for President Trump’s tariff threat from Friday and it caused the NASDAQ to plunge nearly 3.5% on the day, while the other two indices dropped by just under 3%. 

But the market has been really good about turnarounds lately… not just from day to day but also intraday. In fact, Wednesday saw the biggest single-day rebound of the year with the Dow nearly finishing in the green after an almost 600-point dive. And we saw another impressive bounce today, though none of the indices finished on the plus side.  

The big problem for stocks on Friday was the President stating that the U.S. is not ready to strike a deal with China just yet. While it was a negative headline, it certainly wasn’t a surprise. Does anyone think we’re on the cusp of a trade deal right now? 

So once the kneejerk reaction subsided, stocks had a chance to pare the losses. The Dow fought back from a nearly 300-point deficit to finish with a decline of only 0.34% (or about 91 points) to 26,287.44. It got into the green a couple times in the final hour. 

The S&P dropped 0.66% to 2918.65, while the NASDAQ saw the steepest slide of 1% (or 80 points) to 7959.14.

The market proved to be resilient this week, which makes sense since the economy remains strong despite recent volatility. 

Since there’s been no progress on the trade front, we could be in store for another crazy time next week. Let’s hope stocks can remain durable no matter what the headlines throw at them.

Today's Portfolio Highlights:

Healthcare Innovators: This unpredictable market has Kevin in the mood to reduce risk by taking some profits. Case in point, Tabula Rasa Healthcare (TRHC) soared 10% this morning after a strong beat and raise quarter, but it’s a small cap that will remain volatile and susceptible to giving back all of its recent gains quickly. The editor wanted to get out before that could happen, so he sold TRHC on Friday for a 17.9% return in about four months.

Counterstrike: "Next week could be big. A move over 2950 in the S&P and the bulls have burned the bears again. However, a sell off could come on more negative news. A retest of the 200-day moving average is very possible." -- Jeremy Mullin

Value Investor: "The Chinese are likely in it for the long haul on the trade war. This is your classic game of chicken. Who will blink first?

"Right now, many companies appear able to mitigate the 10% tariffs with little pain. They have been moving production out of China over the last year in preparation for the final traunch of tariffs. Have they gotten everything out? No. But a lot of it has now been diversified across other markets.

"Additionally, many can pass along some price increases that will alleviate the rest. That means the burden will shift to the consumer, but the consumer is unlikely to balk at small increases.

"But it's only 10% expected to go on on Sep 1. A 25% tariff will be harder to mitigate.And the Chinese know it. That's why they have dug in their heels and the talks are going nowhere."
-- Tracey Ryniec

Have a Great Weekend,
Jim Giaquinto

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