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Rate Cut Hopes End Market’s Two-Day Slide

Jim Giaquinto

With a little help from a top Fed official, the major indices staged a late-session rally on Thursday to finish in the green and ward off a third day of losses.

New York Fed President John Williams was the big hero as he backed “preventative measures” to combat signs of economic trouble. In fact, he said they should be taken quickly and forcefully instead of being reactive.

The market couldn’t agree more! Stocks almost immediately started recovering from a Netflix-inspired selloff.

The S&P finished with a gain of 0.36% to 2995.11, while the NASDAQ improved 0.27% (or around 22 points) to 8207.24.

The Dow rebounded from a 150-point plunge and inched into the green right before the closing bell. It advanced 0.01% (or about 3 points) to 27,222.97.

This was the first positive close for the major indices since Monday, when they were also at all-time highs.

Stocks fought through a nearly 10.3% plunge for streaming giant Netflix, which really disappointed the market last night by missing expectations for global paid subscribers and reporting its first loss of domestic subscribers in nearly a decade.

Now we head into Friday’s session with our two-week winning streak in jeopardy. Fortunately, the losses have not been steep in the previous two sessions, leaving the S&P down by only about 0.5% through Thursday. The other two major indices are off even less than that.

One good rally would not only give us a third week of gains, but would also get the indices back to all-time highs.

Perhaps Microsoft can help. The software giant was the anti-Netflix on Thursday, reporting a strong quarterly report after the bell. As of this writing, shares are up approximately 1.5% afterhours.

Today's Portfolio Highlights:

Surprise Trader: A positive earnings surprise of more than 21% was on the menu for BJ’s Restaurants (BJRI) when it last reported. With a healthy Earnings ESP of 3.94% for next Thursday’s quarterly release, Dave thinks the stock is poised for another beat. Furthermore, a considerable pullback from recent highs give the portfolio an attractive entry point for a 12.5% allocation. Read the full write-up for more this new addition.

Technology Innovators: You may have never heard of Elastic (ESTC), but Uber and Lyft know all about the company. It powers the tech that tracks all the cars in those ride-sharing companies in real time. Brian is going out on a limb a little with the addition of ESTC, as it is still running a loss and hasn’t been public for a full year yet. However, the stock is near its 52-week high and other companies like Dominos Pizza are seeing the benefits of customers being able to track deliveries. In short, the editor thinks the stock is a winner with tons of potential moving forward. He added ESTC on Thursday and should have another buy tomorrow. Read the full write-up for more.

Options Trader: It’s been 2 ½ months since the portfolio added bull call spreads in automotive retailer Asbury Auto (ABG). Now, there’s only 1 day left before expiration. The position could only make a few hundred dollars if it were held one more day, so Kevin decided to remove those bull call spreads a little early by selling to close the 4 July 80.00 Calls AND buying to close the 4 July 85.00 Calls. These spreads brought a nice return of nearly 75%.

Home Run Investor: Despite shares already moving higher, Brian thinks that ACM Research (ACMR) still has plenty of room to run. This Zacks Rank #2 (Buy) chip name has beaten the Zacks Consensus Estimate in the past four quarters and has a valuation that’s far from being “crazy high”. But the editor is most impressed with its growth potential. This addition replaces Adtran (ADTN) and keeps the portfolio fully invested. Read the complete commentary for more on today’s moves.

Have a Good Evening,
Jim Giaquinto

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