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Drone Attacks Spike Oil Prices and Snap Dow’s 8-Day Run

Jim Giaquinto

It took an international event to derail the Dow’s 8-session winning streak… and we’re not even talking about China! 

The problem was with Saudi Arabia, where a series of drone attacks this weekend on that country's oil production facilities disrupted the world’s oil output and sent prices soaring on Monday.

Investors are concerned that such developments will put additional pressures on a global economy that already seems to be slowing down. 

Fortunately, the U.S. has dramatically increased its oil production over the past several years, so this type of event doesn't pack the same punch as it would have a few years ago.
But it did have enough of an impact to start this week on a sour note.

The Dow dipped 0.52% (or nearly 143 points) on Monday to 27,076.82, putting an end to 8 consecutive sessions in the green stemming from encouraging news on the trade front with China. 

Meanwhile, the S&P closed below 3000 again with a dip of 0.31% to 2997.96, while the NASDAQ was off 0.28% (or about 23 points) to 8153.54. 

These indices have put together three straight positive weeks and they still have a good chance of making it four in a row. Even with all of today's troubles, the Dow and S&P remain approximately 1% away from new highs despite today’s pullback. 

It looks like Iran was behind the attacks, but President Trump doesn’t plan to be hasty in responding. 

Despite this Middle Eastern drama, the big story this week continues to be the Fed meeting, which starts tomorrow.

Investors aren't going to let a drone attack divert their attention from the Committee’s rate decision on Wednesday. Of course, they are counting on another cut of at least a quarter-point. 

Stocks did not react as sharply to the oil disruption as energy prices did, which means there’s still a good chance that we could see new highs in the coming days. 

Let’s just hope there are no more surprises…


Today's Portfolio Highlights:

Blockchain Innovators: The peer-to-peer lending space is fertile ground for blockchain, since the technology can help streamline the business by weeding out inefficiencies. That was the basis for today’s addition of LendingClub (LC), a Zacks Rank #2 (Buy) online financial services company that is expected to grow revenue 12.3% this year and another 13% next year. Read the full write-up for more on this new addition.

Technology Innovators: The portfolio is getting back into the security space with the addition of Radware (RDWR), a Zacks Rank #1 (Strong Buy) provider of a broad range of Internet traffic management solutions. The company has an impressive record of easily beating the Zacks Consensus Estimate with an average earnings surprise of more than 90% over the past four quarters. Most recently, it beat by more than 83%. The stock had a rough August, but Brian believes its poised to head higher. Therefore, he added RDWR on Monday at a great entry price and still has a couple open positions for other opportunities. Read the complete commentary for more.

Black Box Trader:
The portfolio swapped out three positions in this week’s adjustment and cashed in three positive returns along the way. Today it sold:  

• NRG Energy (NRG, +6.9%)
• Arconic (ARNC, +5.8%)
• T-Mobile US (TMUS, +0.7%)

The new buys that replaced these names are:  

• CVS Health (CVS)
• GMS (GMS)
• Walmart (WMT)

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.

Options Trader: "But it’s clear that the U.S. energy market is night and day different than what it was 15-20 years ago and longer. As recently as 2005, we imported roughly 60% of our consumption needs. That number is now less than 19%. (The net number however is much smaller).

"Once upon a time, a big disruption like that would have wreaked havoc on our economy. Now, the U.S. can brush it off. And since one person’s cost is another person’s profit, the U.S. companies that export their energy products are actually benefitting.

"While we hope Saudi Arabia’s production can get back to normal asap so it doesn’t cause hardships for others, the U.S. is in a strong position where we can weather these types of situations."
-- Kevin Matras

All the Best,
Jim Giaquinto

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