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Fed Stands Still While Market Inches Higher

Jim Giaquinto

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The Fed provided enough of a lift on Wednesday to give the major indices their first positive session of the week, but the ongoing trade uncertainty kept stocks from a more energetic rally.

The NASDAQ climbed 0.44% (or nearly 38 points) to 8654.05, while the S&P rose 0.29% to 3141.63. The Dow spent most of the session in the red, but rebounded enough to advance 0.11% (or nearly 30 points) to 27,911.30.

Unlike the last couple of sessions, the indices rallied into the close.

The Fed again gave the market exactly what it wanted… but this time it didn’t involve a rate cut! After slashing three times this year, the Committee kept rates unchanged as was widely expected.

However, the best part is that rates are unlikely to be hiked throughout 2020 as inflation remains extremely low. In fact, Fed Chair Jerome Powell said inflation would have to be “persistent” and “significant” before raising rates again.

What a crazy trip this has been! The Fed raised rates several times last year in moves that many now see as a mistake, and then cut rates thrice in 2019 to correct it in an environment of slowing global growth. And now it looks like there won’t be many moves at all next year.

Of course, the market couldn’t move very far with the trade uncertainty looming in the background. You might have heard that new tariffs are scheduled to take effect on Sunday, December 15th.  

The market is hoping we get a Phase 1 agreement or a delay before the deadline. If so, stocks will likely take off to new highs (which wouldn’t be very far) and link up nicely with a Santa Claus Rally later this month.

But there's no guarantee that will happen (not even close to one actually), which is why stocks started the week with modestly lower performances on Monday and Tuesday.

Let’s see what the headlines have in store for us tomorrow!

Today's Portfolio Highlights:

Home Run Investor: The “AMZN monster” has crushed countless retailers in recent years and continues to do so, but Brian thinks that Zumiez (ZUMZ) will survive the changing environment. This specialty retailer of apparel, footwear and accessories for youngsters has beaten the Zacks Consensus Estimate for 7 straight quarters. It has amassed an average positive surprise of 64% over the past four, including a beat of more than 27% most recently. The editor saw this Zacks Rank #1 (Strong Buy) take a dip this morning and decided to pick it up. ZUMZ also adds some diversification to the portfolio. Read the full write-up for a lot more on this new addition.

By the way, this portfolio easily had the best performer of the day among all ZU names. Photronics (PLAB) reported quarter results recently, which included a beat on the top line and a raised guidance for next quarter. Shares of this manufacturer of photomasks (a key element in the manufacture of semiconductors) jumped 20.4%, which more than tripled the runner up. The editor thinks the chip space could be heating up right now, so he’s going to see how high this stock can go over the next few weeks. PLAB is up more than 33% since joining the portfolio in mid-October, which makes it the service’s second best performer.

Technology Innovators: With a trade deal up in the air and tariffs scheduled to be added this weekend, Brian has been de-risking his portfolios of late. So when he saw EverQuote (EVER) pull back on Wednesday, the decision was made to protect its impressive gain. The editor thinks he may have sold it a bit too quickly, but you can’t argue with securing a more than 70% return in just a little over 2 months! EVER provides an online marketplace for insurance shopping and it was added on October 3.

All the Best,
Jim Giaquinto

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