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Dow Surges 2% and Retakes 26K

·6 min read

SPECIAL ALERT: Remember, we need your input to make next week’s new Zacks Ultimate Strategy Session episode the best it can be. There are two ways you can participate:

1) Zacks Mailbag: In this regular segment, Kevin Matras answers your questions ranging from current market conditions, general investing wisdom, usage of the Zacks Rank or any resources of Zacks.com and more. Pretty much anything goes. 

2) Portfolio Makeover: Sheraz Mian and Brian Bolan review a customer portfolio to give feedback for improvement. No need to send us personal information such as dollar value of holdings. Simply email us with all of the tickers you own.

Just make sure to email your submissions for either one, or both, by Thursday morning, June 4. Email now to mailbag@zacks.com.

The reopening rally not only continued on Wednesday, but it actually found another gear as money moved into economically-sensitive areas again and helped the Dow retake another milestone that was lost in the selloff.

The index surged by over 2% (or about 527 points) to close above 26,000. To be more precise, it soared past that mark and ended at 26,269.89. It was the index’s third straight day of green.

The S&P climbed 1.36% to 3122.87, while the NASDAQ came up short again since tech isn’t leading the market these days. Still, the index advanced 0.78% (or a little less than 75 points) to 9682.91. These indices now have four-day winning streaks each.

The NASDAQ can also boast of being less than 2% away from its all-time high.  

Anything that helps this economy in its reopening will have a positive impact on the market right now. And on Wednesday, we received some data that suggests the worst of this shutdown could be behind us. If so, it would provide a great foundation for getting everything back on track.

ADP reported that private payrolls were down 2.76 million in April. Now that’s still really bad. However, it was exorbitantly better than expectations that were knocking on the door of 9 million! The result was also a remarkable improvement from April.

The data underscores the mellowing of weekly jobless claims lately. And it’s nice to see some better-than-expected jobs data ahead of Friday’s employment situation, though ADP shouldn’t be considered a bellwether of that report.

Also on Wednesday, ISM Services came in at 45.4 for May. Again, that’s not a great number since it’s still far away from 50 (or expansion). In other words, it is still contracting, but not as much as the previous month’s 41.8. The April result was the worst reading in over a decade.  

This comes a couple days after the ISM manufacturing report, which the market also liked since it improved to 43.1 in May from 41.5 in April.

That’s three days of green to start June! And there could be even more upside to come if the economic reopenings stay on course and the data continues to improve. 

Today's Portfolio Highlights:

Value Investor: If a retailer doesn’t have to offer deep discounts at this difficult time, then it’s probably a good sign of strength amid all the challenges out there. Such was the case that Tracey observed with Oxford Industries (OXM). The major brand for this apparel, accessory and lifestyle retailer is Lily Pulitzer… and you won’t see any 50% or 70% sales if you go to their website. OXM is a company that’s still paying its dividend and has attractive value fundamentals besides earnings estimates being slashed for this year and next, It also recently moved up to a Zacks Rank #3 (Hold), which makes it buyable for this portfolio. The editor is expecting a strong earnings report when OXM goes to the plate on June 10. The stock is up 7.5% in the past 5 sessions but still down 34% this year, so she’s getting in at a good price. Read the full write-up for a lot more on this new addition.

Home Run Investor: The portfolio swapped out a biofuels & renewable chemicals company with a solar stock on Wednesday. Brian sold Renewable Energy Group (REGI) for a 24.5% return in two months. The new addition is Canadian Solar (CSIQ), a Zacks Rank #2 (Buy) that has beaten earnings estimates in three of the past four quarters. The editor thinks this stock will continue to outperform and believes it makes a great replacement for REGI. CSIQ was basically flat when it was added this morning, which should give the portfolio a lot of upside from here. Read the full write-up for a lot more on today’s moves.

Surprise Trader: The Fiber Optics industry is in the Top 2% of the Zacks Industry Rank, and it just so happens that a big name from that space surprisingly (pardon the pun) popped up on Dave’s screen today. Ciena Corp. (CIEN) is a Zacks Rank #2 (Buy) that has a positive Earnings ESP of 5.85% for its upcoming quarter, which comes before the bell tomorrow. So this is one of the editor’s “quick turnaround ideas”. He added CIEN on Wednesday with a 12.5% allocation. Dave also decided to cash in BJ’s Wholesale Club (BJ) for a nice return of approximately 25% in just 2 weeks. The complete commentary has more on today’s moves. And for the second consecutive session, Guess (GES) was a top performer among all ZU portfolios. The stock jumped 11.6% today. 

TAZR Trader: Shares of Micron (MU) have been rather stagnant of late, but earnings estimates are on the rise after this memory company refreshed its positive guidance at a recent conference. According to Kevin, this is evidence that many investors don’t believe in the cycle recovery and see MU as more of a utility stock. But the editor begs to differ and considers this name to be the “NVIDIA of memory”. With an attractive valuation and a number of bullish institutional analysts, the portfolio added MU on Wednesday with a 10% allocation. Read the full write-up for a lot more on the new pick, including specifics on its recent updates and comments from the analysts.

Stocks Under $10: The top performer among all ZU portfolios on Wednesday was easily Digital Turbine (APPS), which jumped 31.9%. The runner up advanced ‘only’ 11.6%. This company reported quarterly results yesterday, which included earnings that matched estimates and revenue that soared 45%. APPS offers products and solutions for mobile operators, device OEMs and third parties. The stock is up more than 54% in the portfolio since being added just a little over a month ago.

Have a Great Evening,
Jim Giaquinto

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