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Rate Cut Wait Almost Over

Jim Giaquinto

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The market wasn’t in a mood to gain ground on Tuesday with the Fed decision looming on the horizon, but it did come well off its lows of the session by the closing bell.

The S&P slipped 0.26% to 3010.18, while the NASDAQ declined 0.24% (or nearly 20 points) to 8273.61. It was the second straight day of losses for these indices.  

The Dow came closest to the plus side and almost extended its winning streak to 4 days. In the end though, it fell just short with a slide of 0.09% (or about 23 points) to 27,198.02.

Stocks took a header this morning when President Trump Tweeted about China not doing their part in buying U.S. agricultural products.

Remember, the U.S. has trade negotiators in China right now. But hopes for a deal being reached are pretty low, so how much damage could these comments really have done?

That’s one of the reasons why stocks rebounded from the pullback on Tuesday. The market is more interested in the Fed decision tomorrow than trade at the moment, which explains the Dow’s recovery from a loss of 150 points at its worst of the session.

Investors were also more interested in Apple’s report after the bell. Shares of the iPhone maker are up more than 4% afterhours as this is being written, due to a positive earnings surprise and an encouraging outlook.

Under normal circumstances, we would expect this report to have an impact in tomorrow’s session. But let’s face it: investors are much more interested in the rate decision from the Fed.

Everyone and their mother expects a rate cut tomorrow of at least 25 basis points. Once the cut is finally out of the way, the market will hopefully be able to resume its record run thanks to the strong American consumer and this better-than-expected earnings season.

Today's Portfolio Highlights:

Counterstrike: Shares of Deckers Outdoor (DECK) got ‘clobbered’ due to a soft second-quarter guidance. However, this apparel and footwear retailer beat on both the top and bottom lines, while raising its fiscal 2020 guidance. Jeremy thinks this Zacks Rank #1 (Strong Buy) has great potential to bounce over the next month. He added a smaller, 5% allocation in DECK to get started. Read the complete commentary for more on this new addition.

Surprise Trader: The portfolio’s added a little curb appeal with a 12.5% allocation in BrightView (BV), a Zacks Rank #2 (Buy) commercial landscaping company that’s reporting before the bell on Wednesday, August 7. The stock beat by 15% last time and has a positive Earnings ESP for next week’s release. BV has moved to more than $19 from around $10 this year and still has running room before reaching its all-time high of more than $22. Dave sold Lockheed Martin (LMT) for a 2.5% return in less than 2 weeks to make room for BV. Read the full write-up for more.  

Healthcare Innovators: Despite a beat and raise quarter, shares of Merck (MRK) just can’t get much traction to move higher. Kevin doesn’t want to hold onto this name amid ‘lingering pressure from drug pricing ideas in Washington’. Therefore, he sold MRK on Tuesday for a nearly 50% return! 

Zacks Short List: More than half of the portfolio was changed this week with four of the six departing stocks bringing profits to the service. The short-covered names include:   

• Boeing (BA, +8.2%)
• BioMarin Pharma (BMRN, +5.8%)
• Gardner Denver Holdings (GDI, +0.9%)
• 3M Company (MMM, +0.5%)
• Palo Alto Networks (PANW)
• World Wrestling Entertainment (WWE)

The new buys filling these open spots include:   

• Anadarko Petroleum (APC)
• Hess Corp. (HES)
• Ionis Pharma (IONS)
• iRobot Corp. (IRBT)
• ServiceNow (NOW)
• TAL Education Group (TAL)

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

Have a Great Evening,
Jim Giaquinto

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