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Dow Jumps Over 1% as Reopening Rally Continues

·5 min read

SPECIAL ALERT: The June episode of the Zacks Ultimate Strategy Session will be available for viewing no later than Wednesday, June 10. Kevin Matras, Kevin Cook, Brian Bolan and Sheraz Mian will cover the investment landscape from several angles in this popular event.

Don’t miss your chance to hear:

▪ Sheraz and Kevin Cook Agree to Disagree on whether the market has discounted the worst of the earnings recession even though we haven’t see the trough yet
▪ Kevin Matras answers your questions in Zacks Mailbag
▪ Sheraz and Brian choose one portfolio to give feedback for improvement
▪ And much more

Remember, we need your input. Please submit your questions for Zacks Mailbag and Portfolio Makeover by Thursday morning, June 4. Email now to mailbag@zacks.com.

Then log on to Zacks.com and bookmark this page.

Money flowed into economically-sensitive areas again on Tuesday, which helped the rally continue as the market keeps focused on the economic re-openings.

The Dow was the biggest beneficiary of the rotation with a surge of 1.05% (or about 267 points) to 25,742.65. The S&P increased 0.82% to 3080.82.

With tech taking a break from leading things, the NASDAQ spent a good amount of the session in the red. However, it moved upward in the second half and finished higher by 0.59% (or about 56 points) to 9608.38.

The indices rallied right into the close and finished around the day’s highs.

The market is obviously most interested in getting this economy back to business, which would have been making the headlines this week if it weren’t for the unrest.

Stocks aren’t reacting to the oftentimes violent protests that we’ve been having in many major cities over the past week. All bets would be off, though, if these disturbances interrupt the slow but steady process of getting the economy moving.

Again, it all comes back to the re-opening.

Stocks are coming off of back-to-back weekly gains AND back-to-back monthly gains. Most of the coronavirus selloff, which hit its low on March 23, has been recovered. In fact, the NASDAQ is within 2% of a new high.

And now stocks are up in the first two days of June, which has some investors skeptical of the rally given all the pressures out there.

In addition to the riots, we’ve been seeing increased tensions with China and we still don’t know what form the recovery will take and if there will be a second wave sometime in the fall.

Nevertheless, the Fed has made extraordinary moves to support the economy in its time of need and we’re hearing about more help from Congress.

So the market seems happy to move higher for now with optimism that things will improve moving forward…

Today's Portfolio Highlights: 

Stocks Under $10: When you’ve got a full portfolio and want to add a couple new names, then you need to make some room. On Tuesday, Brian sold A10 Networks (ATEN) for a nice 13.3% return in just a little over two months. He also got out of Gaia (GAIA) since the stock has come under pressure now that things are beginning to reopen.

The new buys are SunOpta (STKL) and Wrap Technologies (WRTC). STKL is a Zacks Rank #2 (Buy) natural & organic food, supplements and health & beauty company. The editor thinks its chart is “wonderful” and sees this move as a defensive-style name. WRTC is a Zacks Rank #1 (Strong Buy) security technology company with a tool that could help with the rioting. The editor believes it might be the next “hot thing” as Taser was a few years ago. Learn a lot more about today’s moves in the complete commentary.

Counterstrike: Shares of Workday (WDAY) soared 10% after a solid quarterly report last week, but has since pulled back into a buyable area for Jeremy. He added this provider of software solutions for financial management and human resources on Tuesday with a 10% allocation. He’d be willing to buy more if it pulls back and holds around $165. 

However, that was only one of four total moves today. The portfolio also added a 3% allocation in Direxion Daily SP 500 Bear 3X Shares (SPXS) as a hedge against all the negative news out there. Meanwhile, Jeremy still likes CME Group (CME), but the technicals have soured and the stock has been in the service for over two months. It was sold for a gain of 18.9%. Lastly, half of United Natural Foods (UNFI) was sold for a 15.5% return in just a few days. Read the full write-up for a lot more on today’s moves.

Zacks Short List:
The portfolio swapped out four names in this week's adjustment. The stocks that left the service after being short-covered included:

• China Lodging Group (HTHT)
• Ceridian HCM (CDAY)
• BioMarin Pharma (BMRN)
• Ryder System (R)

The new buys that replaced these names are:

• Burlington Stores (BURL)
• Darden Restaurants (DRI)
• Ross Stores (ROST)
• TJX Companies (TJX)

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

Surprise Trader: Just one day in the portfolio and Chewy (CHWY) is already one of the top-performing stocks of the day among all ZU names. Dave added this online pet retailer yesterday, since it has an Earnings ESP of 100% for the quarter coming next Tuesday. The stock was up 9.6% today. In fact, this portfolio had three of the top five winners of the session. In addition to CHWY, Guess (GES) climbed 7.9% and CURO Group Holdings (CURO) rose another 6.5%.

Insider Trader:
"But essentially, this secular bull began in 2013 when the S&P 500 took out the 2007 highs and never looked back. It has had plenty of opportunities to retest it, if it wanted to, including the oil price plunger of 2015-2016, the manufacturing recession of 2016, the trade war of 2018-2019 and now the coronavirus sell-off. 

"It has gone higher every time. 

"This is year 7 of this secular bull. The average length of time is 11 years. 

"That means we'll likely see more new highs here in 2020, even if we get a pullback sometime this summer."
-- Tracey Ryniec

All the Best,
Jim Giaquinto

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