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New Highs Regained After Infrastructure and Ahead of CPI

·5 min read
In this article:
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SPECIAL ALERT: The August episode of the Zacks Ultimate Strategy Session is now available for viewing! Tune in to this “must-see” event when Kevin Matras, David Bartosiak, Neena Mishra, CFA, FRM, and Sheraz Mian discuss the investment landscape from several angles. Don’t miss your chance to hear:

▪ Sheraz and Neena Agree to Disagree on whether inflation worries are overblown
▪ Kevin answers questions covering whether investors can invest in mutual funds and/or ETFs and pretty much forget about worrying about stock-market fluctuations, is buy-and-hold better than to book profits and rebuy at lower levels, and what the Zacks Rank and Style Scores tell investors about the stocks they're looking into in Zacks Mailbag
▪ Sheraz and David choose one portfolio to give feedback for improvement
▪ And much more

Simply log on to Zacks.com and view the August episode here. And please let us know what you think of this format. Email all feedback to mailbag@zacks.com.


The Dow and S&P logged new record highs on Tuesday after the $1 trillion infrastructure bill made progress in Congress and before a major inflation indicator is released tomorrow.

The past three days have been kind of like a tennis match with the recovery names on one side and tech on the other. Several factors are keeping investors on their toes while we wait for Jackson Hole later this month, including a strong earnings season, an impressive jobs report, the increasing delta variant and rising inflation.

On Tuesday, two of the major indices returned to all time highs for the first time since last Friday. The Dow rose 0.46% (or about 162 points) to 35,264.67 and the S&P advanced 0.10% to 4435.75 (which is a new record by less than 1 point). The Dow certainly got a boost from the infrastructure bill passing the Senate. It will now move onto the House of Representatives.

The NASDAQ, though, slipped in the session after being the only index in the green on Monday. It was off 0.49% (or about 72 points) to 14,788.09 with all of the FAANGs in the red.

But the next two days will likely be the most important of this week, as we’re scheduled to receive back-to-back inflation indicators. Any big surprise in either direction could potentially move the market, as investors continue to struggle between their own fears of rising prices and the continuing reassurances by the Fed that it’s all transitory.

The first of these big reports is the CPI tomorrow. In the last print on July 13, the index increased 5.4% in June year over year, which was the biggest jump in about 13 years. The result was also more than expectations at 5%.

However, the market was only down modestly in that session since investors were well aware that inflation was on the rise. Analysts expect another hot report tomorrow.

How will the market respond this time? We’ll find out on Wednesday.  

Today's Portfolio Highlights:

Stocks Under $10: For the past five quarters now, communication software developer Ribbon Communications (RBBN) has topped the Zacks Consensus Estimate. In fact, it amassed an average surprise of 69% over the past four quarters. Earnings estimates for this year and next are on the rise, which explains RBBN’s status as a Zacks Rank #2 (Buy). Brian thinks this stock is poised for a strong back half of the year with strength continuing into next year. He also sees a “great” valuation with margins moving in the right direction. Read the full write-up for more on today’s new addition of RBBN.    

Surprise Trader: The shutdown was certainly frustrating for a company like The Middleby Corp. (MIDD), which provides cooking, warming, food preparation and packaging equipment. But despite restaurants being closed or severely curtailed, this company continued beating the Zacks Consensus Estimate. It has now topped expectations for seven straight quarters. This Zacks Rank #2 (Buy) goes to the plate again this Thursday before the bell with a positive Earnings ESP of 5.3%. Dave added MIDD on Tuesday with a 12.5% allocation, while also cutting the “breakeven trades” of Veeco (VECO) and Beacon Roofing (BECN). Read the full write-up for more on today’s action.

TAZR Trader: According to Kevin, this “NASDAQ mini-bubble could let some air out quickly at any time”. Therefore, the editor decided to sell half of his position in payment processing innovator Square (SQ) on Tuesday for a 28.3% return. The editor believes resistance up near $285 will keep the stock confined until the next upward cycle. He’ll buy more of SQ on any broad pullbacks. In other news, The Trade Desk (TTD) was a top performer today by climbing 7.6%. This digital-advertising platform operator is now the second best performer in the portfolio with an advance of more than 76% since being added.  

Zacks Short Sell List: This week’s adjustment included only one change. The portfolio short-covered T-Mobile US (TMUS, +X%) and filled the open spot by adding The AZEK Company (AZEK). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide.

All the Best,
Jim Giaquinto

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