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S&P Streak Ends as Stocks Step Back

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After two straight weeks of gains and with earnings season right around the corner, stocks took a step back on Tuesday with losses in each of the major indices.

Unfortunately, that means the S&P’s eight-session winning streak is over, as the index slipped 0.61% to 2878.20.

The NASDAQ had the smallest loss with a decline of only 0.56% to 7909.28, while the Dow had the steepest with a slip of 0.72% (or about 190 points) to 26,150.58 (it was off more than 230 points at its worst of the session).

Financial companies were among the harder hit on Tuesday, which makes sense since the big banks will be kicking off earnings season later this week. J.P. Morgan and Wells Fargo get the party started on Friday, but today they were off 0.74% and 1.5%, respectively. And their counterparts scheduled for next week didn’t do much better.

In the aftermath of a strong jobs report and with no trade talks to give us headlines, the attention turns toward earnings season. Believe it or not, the market is rather nervous about it. As Sheraz Mian said in his most recent Earnings Preview, total earnings for the S&P are expected to be down approximately 4% in Q1 from last year… which would be the first negative result since 2016.

And there were other factors impacting stocks on Tuesday, including the IMF downgrading the global economy and President Trump talking tough on trade with the EU due to subsidies for Airbus.

But for the most part, it was just time for the major indices to take a break. Let’s get ready for a busy few weeks, as earnings season gets underway and, hopefully, a trade agreement is signed with China. Even though we’ve been drifting mostly higher of late, it’s still going to take a catalyst to lift stocks to the next level and past their all-time highs. Some good news on these fronts would be just what the doctor ordered.

Today's Portfolio Highlights:

Stocks Under $10: Energy prices have been rising with no end in sight, so Brian Bolan wants exposure to the industry right here. On Tuesday, he bought Altus Midstream (ALTM), which pulled back in February on news that it would scale back its capital expenditures over the next few years. The market took this as bad news, as evidenced by shorts attacking the stock. But the editor sees an attractive entry point and higher earnings estimates as this Zacks Rank #2 (Buy) now has time to work on margins. He also sees the possibility of a short squeeze. Read more about this new addition in the complete commentary.

Blockchain Innovators: The insurance industry needs to be disrupted… and Argo Group (ARGO) wants to be the company to do it. That’s why its using blockchain technology to change the game of what many consider to be a boring business. This attitude certainly piqued Dave’s interest, but he’s also impressed that this Zacks Rank #2 (Buy) has a solid history of beating the Zacks Consensus Estimate and has more than doubled in the past four years. The editor added ARGO on Tuesday and made room by selling UnitedHealth (UNH) for a 10.6% return. Read the full write-up for more.

Healthcare Innovators: The portfolio cashed in a couple double-digit winners on Tuesday. Alexion Pharma (ALXN) has a new generic competitor for its Soliris drug, so Kevin decided to take a long-term gain of 17.7% near the top of its two-and-a-half-year trading range. Meanwhile, Align Technology (ALGN) hit its target of $300, after a price target bump from a major brokerage firm, and has quickly fallen back. With the earnings report just two weeks away, the editor decided this was a good time to sell the stock for a 12.4% return in less than a month.

Zacks Short List:
The portfolio swapped out three names in this week's adjustment. The short-covered stocks that left the service today included WageWorks (WAGE), Apache Corp. (APA) and Ionis Pharma (IONS). The new buys that filled these spots are:

• Baidu (BIDU)
• Halliburton (HAL)
• Continental Resources (CLR)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

All the Best,
Jim Giaquinto

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