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First Green Session of December

In this article:
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  • OSW
  • SEM
  • CSIQ

Just one day after dropping on fears of a trade deal delay, the market rebounded Wednesday and broke its three-day skid as the sentiment again turned on the long-awaited Phase 1 agreement.

As we’ve said before in this commentary: if you don’t like today’s trade headline, just wait a while and it will change.

The news today included President Trump saying the trade talks were going very well and Bloomberg reporting that the two countries are getting closer to a deal that might include rolling back tariffs.

Just yesterday, the market freaked out on a stray comment from the President that he wouldn’t mind waiting until after the election to strike up a deal with China.

Remember how the market took trade headlines in stride when it was making new highs a couple weeks ago? Not anymore! Now it’s reacting to each headline as we inch closer and closer to the additional tariffs scheduled for Dec. 15.

For today, the headlines were positive and the indices finally ended their losing streak and saw their first green of December.

The S&P advanced 0.63% on Wednesday to 3112.76, while the NASDAQ increased 0.54% (or about 46 points) to 8566.67. The Dow rose 0.53% (or nearly 147 points) to 27,649.78.

The indices did come off the highs by the close, but they got back some of the approximately 2% that was lost in the previous three sessions and undoubtedly soothed lingering fears of another December collapse.

Stocks rose despite soft data from ISM Services and ADP Employment, which further shows how trade is the market’s main focus right now.

So what’s your guess for tomorrow’s headline?

Maybe it’ll be that the two sides finally worked out a deal that will be signed directly, leaving any additional tariffs – and some current ones – completely unnecessary!

Well… let’s not hold our breath on that one.

Today's Portfolio Highlights:

Value Investor: Shares of Canadian Solar (CSIQ) are up nearly 19% this year… but had been higher about 45% just a few months ago. Along with the entire solar industry, the stock got “battered” in the second half after a “blistering” start to 2019. CSIQ dropped more than 26% in just the past three months. However, analysts believe the industry’s tough times are in the past and are bullish on 2020. Therefore, it looks like there’s a buying opportunity for one of the world’s largest solar companies. In addition to all the classic value fundamentals, it is also enjoying rising earnings estimates. Tracey thinks CSIQ has been overlooked by Wall Street for long enough, and decided to add a position on Wednesday. Read the full write-up for more.

Home Run Investor: The portfolio made a swap on Wednesday by selling OneSpaWorld (OSW) after it slipped to a Zacks Rank #4 (Sell) and replacing it with the addition of Select Medical Holdings (SEM). This healthcare company owns long-term acute care and inpatient rehabilitation hospitals, as well as occupational health and physical therapy clinics. In late October, SEM reported a strong quarterly report that included a positive surprise of 50%! Earnings estimates have been on the rise, which explains its status as a Zacks Rank #1 (Strong Buy) stock. Read Brian’s complete commentary for a lot more on this new pick.

Counterstrike: "Stocks ticked higher on positive China trade rhetoric…Yes, the same headline I seem to write every day helped stocks higher once again. However, this is just the market we have. One day talks are bad, the next days the talks are good and the market reacts accordingly.

"Today we went higher after Trump said China talks were going well at the NATO Summit press conference. This the day after he said we won’t get a deal till after the election. Who knows what the tweet will be tomorrow, but for now stocks like the tone and we saw relief.

"We have an important day coming that will give us a big clue how strong this market can remain. December 15th additional tariffs will go on Chinese goods, assuming Trump sticks to his promise. It will be very interesting to see how the market reacts. I would guess an exaggerated sell off that will be bought, but who really knows."
-- Jeremy Mullin

All the Best,
Jim Giaquinto

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