S&P Reaches New Record After Trade Ceasefire

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The market didn’t get a storybook ending to the Trump/Xi meeting at the G20, but it certainly got what it expected. And it was enough to secure a positive start to the month of July and the second half of the year. 

If investors could’ve written the script, they would’ve wanted a miraculous breakthrough in Japan that ended the conflict once and for all.

But nobody was counting on that.  

However, we were expecting some type of common ground that would re-start talks and maybe even suspend additional tariffs during the negotiations.

And that’s what we got!

The major indices jumped at the open of Monday’s session, sending the S&P to a new intraday high. The rally faded a bit as the day continued, but caught a second wind in the final hour.

In the end, the S&P closed at another new high! The index rose 0.77% to 2964.33. It last reached a record on June 20th, and then abruptly went into a four-day slide.

The best performance came from the NASDAQ, which jumped 1.06% (or nearly 85 points) to 8091.16. Chip stocks were especially strong on Monday as the new trade agreement included a lessening of restrictions on U.S. companies selling to Chinese giant Huawei.

The Dow looked like it might squander a nearly 300-point gain, but that end-of-day surge got it back to a triple-digit advance. It was up 0.44% (or 117 points) today to 26,717.43.

The market’s got BIG shoes to fill if its thinking about an encore to June’s performance. The NASDAQ soared 7.4% last month, while the Dow was up 7.2% and the S&P increased 6.9%.  

The positive result from the G20 meeting is a good first step for July, but this month is full of potentially market moving events.

Despite the holiday on Thursday, we’re still getting the Government Employment Situation report on Friday, which you’ll probably remember was much softer than expected last time.

We’ve also got earnings season starting this month, so the market will be paying close attention to any signs that slower growth or the trade conflict is impacting corporate results.

Most importantly though, the market is absolutely demanding that the Fed cut rates in the July meeting. If it doesn’t get what it wants from the Fed statement on the last day of this month, then we’ll probably see a nice tantrum to close things out.

So July starts with an important trade summit and will end with one of the most anticipated Fed meetings in years. Aren't the summer months supposed to be boring?

Today's Portfolio Highlights:

Value Investor: After all these years, the market STILL hates oil stocks. But Tracey feels like the sector is undergoing final capitulation, as analysts and the companies themselves realize just how oversold shares are. Sooner or later, investors will realize it as well. This portfolio has never shied away from the space, which continued today with the additions of Continental Resources (CLR) and Berry Petroleum (BRY). CLR is a large cap that recently announced it was starting a dividend and a $1 billion share buyback program. BRY is a smaller name, but that doesn’t keep it from paying a dividend. Tracey was especially impressed that this stock initiated a $100 million share buyback when prices were crashing last year. Read the complete commentary for a lot more on these new additions.

Stocks Under $10: The trade truce between the U.S. and China will be a big boon for several industries, including the electronics manufacturing space. Brian plans to capitalize on this momentum through the addition of Celestica (CLS). The editor likes its valuation and believes estimates are very beatable, especially if the trade conflict improves. Read the complete commentary for more on this new addition and be ready for another buy tomorrow.

Counterstrike: The portfolio plans to have plenty of cash at the ready for this earnings season, as Jeremy expects lackluster reports to open countless buying opportunities. Plus, you know this cautious editor is skeptical of the U.S./China trade agreement and wants to protect against another setback. Given such an outlook, he wanted to secure the more than 20% gain for Keysight Technologies (KEYS) in less than a month. Therefore, this provider of electronic measurement solutions was sold on Monday.

Technology Innovators: Shares of Cardlytics (CDLX) have been soaring the past few days. In fact, this purchase intelligence platform jumped nearly 10% today. Brian has been talking a lot about being long and maintaining exposure, but there are also times to be practical and take gifts when they are presented. The editor thinks this is a good time to sell CLDX and secure a  16.4% return in less than a month.

Black Box Trader: The portfolio swapped out two names in this week's adjustment. The stocks that were sold included Target (TGT) and Synchrony Financial (SYF) for gains of 7% and 2.3%, respectively. The new buys that filled these open positions were Ciena (CIEN) and Dollar General (DG). Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.

All the Best,
Jim Giaquinto

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