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Record Streak Stays Alive as Stocks Recover From Weak Start

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The new week started with stocks solidly in the red on Monday morning, but then the S&P and Dow staged another comeback that kept their record-setting pace alive. Meanwhile, we’re getting ready for a week full of retail earnings and data that should give us a read on the consumer and, therefore, the economic recovery.

“Equities saw pressure in the morning, then grinded their way higher all day. Sound familiar?”, said Jeremy Mullin in Counterstrike. “Things continue to be quite confusing, but the model to follow has been selling in the morning and buying in the afternoon.”

The Dow was down by nearly 300 points at its worst of the session, but finished higher by 110 points. It was up 0.31% to 35,625.40. The S&P rose 0.26% to 4479.71. These indices have now put together five consecutive sessions of record closes.

The NASDAQ, however, slipped 0.20% (or about 29 points) to 14,793.76. The tech-heavy index is under much more pressure than its counterparts these days. It was down by nearly 13 points last week, while the Dow and S&P were up 0.9% and 0.7%, respectively.

Softer-than-expected retail sales in China were one of the reasons why stocks had such a sluggish morning. And it just so happens that U.S. retail sales will be released tomorrow. You may remember that last month’s print was a pleasant surprise, climbing 0.6% in June to beat expectations calling for a slight loss. It was also a noteworthy improvement from the 1.7% plunge in May.  

And that report is just the tip of the iceberg when it comes to retail news this week. Earnings season may be winding down, but we always finish up on an exciting note when some of the biggest retailers in the world take the stage.

Tomorrow we get releases from Walmart (WMT) and Home Depot (HD) before the bell, which were up 0.82% and 1.13% today, respectively. And on Wednesday this week we get the Fed minutes for the July meeting. The release is always a big deal, but it may take on even more importance as many investors feel that a taper announcement is drawing near.

Today's Portfolio Highlights:

Blockchain Technology: You might not think this portfolio needs a mining company, but Rio Tinto (RIO) is proving that this innovative technology can be used anywhere. The company launched a blockchain-based program called START earlier this year, which is the first sustainable label for aluminum using blockchain technology. It’ll be similar to a nutrition label on food, except it will offer information on things like carbon footprint, regulatory compliance and much more. Earnings estimates for RIO are going “through the roof”, which explains why the stock is a Zacks Rank #2 (Buy). Read the full write-up for a lot more on this new addition and be ready for another buy later this week.

Surprise Trader: Earnings season may be slowing down, but it’s not over. In fact, the tail end is when the retailers come out to report, which is where Dave went for his first of four additions this week. He picked up Tapestry (TPR), a designer and marketer of fine accessories and gifts (formerly known as Coach). This Zacks Rank #2 (Buy) has beaten the Zacks Consensus Estimate for four straight quarters with a positive surprise of 70% last time. And now it has a positive Earnings ESP of 6.06% heading into its next release on Thursday after the bell. The editor added TPR on Monday with a 12.5% allocation, while also getting out of the “meandering” Middleby Corp. (MIDD) position. Read the complete commentary for more.

Black Box Trader: The portfolio replaced four names in this week's adjustment. The stock that were sold on Monday included:

• Target (TGT, +5.1%)
• Interpublic Group of Cos. (IPG, +5%)
• Mattel (MAT)
• Skechers U.S.A. (SKX)

The new buys that filled these spots are:

• Avis Budget Group (CAR)
• DICK'S Sporting Goods (DKS)
• Nucor (NUE)
• Urban Outfitters (URBN)

Read the Black Box Trader’s Guide to learn more about this computer-driven service. By the way, this portfolio had a top performer on Monday with AutoNation (AN) advancing 5.7%.

Options Trader: "Stocks closed mostly higher today with the Dow and S&P both hitting new all-time highs in the process.

"The markets were weaker in the morning and for a portion of the afternoon. But after hitting their worst levels early on, they spent the rest of the day making their way back and then some.

"A stellar Q2 earnings season has really lifted stocks. And even though it's winding down, the robust outlooks for Q3 and beyond suggests there's a lot more upside to go.

"Same goes for the economic reports. Although, while some reports have beaten expectations, like the recent employment report which showed 943,000 new jobs were created last month, some have slowed down a bit. But we continue to see strong economic activity from a rebounding economy eager to open back up."
-- Kevin Matras

All the Best,
Jim Giaquinto

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