They Meet, We Rally
It looks like the Fed won’t completely dominate this week!
This wasn’t your normal do-nothing session ahead of a central bank statement. The major indices soared on Tuesday by 1% or more based on a trade Tweet from you-know-who.
President Trump wrote about a “very good” phone conversion today with China President Xi and that the two leaders would have an “extended meeting” at the G20 in Japan next week.
It would have been disheartening for these two guys to be in the same place at the same time and NOT talk about the trade conflict that has the whole world biting its fingernails.
Needless to say, the market loved the news. Nobody expects this get-together to solve the problem, but we’ll never get a trade resolution unless these two sides get back to talking to each other. There hasn’t been much conversation since talks broke down last month.
The reaction from the major indices on Tuesday was a broad rally, especially for the trade-sensitive chip stocks that helped bring about another solid performance from tech.
As a result, the NASDAQ continued to lead its counterparts with a surge of 1.39% (or nearly 109 points) to 7953.88.
The Dow wasn’t that far behind on a percentage basis as stocks impacted by the trade conflict jumped on hopes that the G20 meeting could set the stage for an agreement down the road.
The index rose 1.35% (or 353 points!) to 26,465.54.
However, the biggest news from the indices on Tuesday was from the S&P. It finally broke through 2900 by rising 0.97% to 2917.75.
It is now less than 1% away from its all-time high!
So here we go. Tomorrow’s Fed statement will either keep this rally going or stop it in its tracks.
The market isn’t expecting action from the Fed tomorrow, but it does want to hear dovish language that sets the stage for a cut (or cuts) in the near future.
Let’s see if it gets what it wants...
Today's Portfolio Highlights:
Stocks Under $10: Now that the market is heading solidly higher on expectations for an accommodative Fed, Brian thinks this is a good time to buy the dip. That was the idea behind adding Unisys (UIS), a worldwide technology services and solutions company. The stock had a good session on Tuesday, but was right around its 52-week low previously. The editor expects to capitalize on further bounces moving forward. The portfolio is nearing its goal of being fully invested. Today’s addition of UIS brings it up to 14 positions, which means there’s only one open spot left. Read the full write-up for more.
By the way, this portfolio easily had the best performer of the session. SunPower (SPWR) was upgraded by a major brokerage today along with a few other solar names. The stock soared by more than 22.5%. SPWR is now up nearly 33% in the portfolio since being added in late April.
Value Investor: With the EU looking to stimulate, the Fed about to cut rates and a Trump/Xi meeting coming to the G20; Tracey thinks this is a good time to make a couple additions to the portfolio. First up, the editor bought “boring” office products staple ACCO Brands (ACCO). But boring can be beautiful when looking for value. This stock pays a dividend that yields 2.6% and has a “rock solid management” to go along with its classic value fundamentals. This Zacks Rank #2 (Buy) is a small cap so it could be volatile, but it’s also expected to grow earnings by 11.5% next year.
Meanwhile, it looks like WW (WW) made a mistake when it changed its name from Weight Watchers. The company -- now focusing on wellness instead of just weight loss -- gave back all of its Oprah gains, but Tracey thinks the selloff was overdone. She still remembers making more than 165% on “WTW” in 2017. Despite bouncing off recent lows, she still considers WW to be a value play and likes that earnings are expected to jump next year by more than 23%. Read the full write-up for more on today’s buys of ACCO and WW. Price targets are coming in the weekly Friday commentary.
Healthcare Innovators: Long-term subscribers of this portfolio know how much Kevin likes medical devices company Align Technology (ALGN). The portfolio has pulled profits from this “smile maker” on several occasions, including a triple-digit return last year. Now that shares have slipped 8% in the past week, the editor can’t resist adding this proven winner again. He also bought GW Pharma (GWPH), which is the only FDA-approved cannabis drug maker. Kevin thinks it’s headed to new highs above $200. Both ALGN and GWPH are Zacks Rank #2s (Buys). The portfolio also sold the stalling Illumina (ILMN), but still banked a nice return of approximately 20% in 6 months. Read the full write-up for more
Technology Innovators: The market is moving higher and Brian would like to get this portfolio fully invested. Therefore, he plans to add two positions this week. Today’s buy was Comtech Telecom (CMTL), a Zacks Rank #1 (Strong Buy) advanced communications solutions company. The stock has a great earnings history with an average positive surprise of 216% over the past four quarters. Plus, CMTL is in the highly-ranked Wireless Equipment space (top 7% of the Zacks Industry Rank) and enjoys a good valuation. Read the full write-up for more and be prepared for another buy on Thursday.
Zacks Short List: The portfolio swapped out two names in this week's adjustment. It short-covered Boeing (BA) and Inphi Corp. (IPHI), and immediately filled these spots by adding salesforce.com (CRM) and CF Industries (CF). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.
Until Tomorrow,
Jim Giaquinto
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