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Red on Halloween, but Green for October

Jim Giaquinto

Despite a negative Halloween session, the major indices just finished a second straight month of gains and move toward a historically strong time of the year for the market.

The NASDAQ jumped 3.7% in October, while the S&P climbed 2% and Dow held on for a 0.5% advance. September was also a green month for the indices, providing a nice one-two punch from the sharp selloff in August.

Stocks have enjoyed the wind at their backs for a while now, stemming from a better-than-expected earnings season, a tariff truce with China and expectations for more rate cuts (which were realized yesterday).

So, they were due for a bit of a pullback, which is what we got on Thursday.

Another soft Chicago PMI report added to the market’s concern about slowing manufacturing, while a news report questioned if a long-term deal with China could happen. Such events provided enough of a reason to pullback on Thursday from the market’s record-setting run.

The Dow declined 0.52% (or about 140 points) to 27,046.23, while the NASDAQ slipped 0.14% (or around 11 points) to 8292.36. The S&P had reached new records in two of the previous three sessions, but was back down today by 0.30% to 3037.56.

The major indices did come off their lows by the close and go into Friday’s session with gains for the week. If they can hold on tomorrow, then the NASDAQ will have a 5-week winning streak, while the S&P will be up for 4 weeks. The Dow will have gone back-to-back in the green.

Tech giants Apple and Facebook each reported strong quarters after the bell last night, which led to advances of 2.3% and 1.8%, respectively, on Thursday. However, it didn’t help the indices today.

And tomorrow’s not going to be a quiet end to the week. In addition to all the other challenges, the market will have to deal with the ISM Manufacturing and Government Employment Situation reports.

Last month’s manufacturing report took a bite out of the market with the lowest reading in over a decade and the second straight month of contraction. However, the jobs report has been solid for a while and is one of the brightest spots of the economy.

Neither report is expected to be robust (with the strike at GM expected to impact the jobs result), but that just means there’s a lower bar to beat.

Today's Portfolio Highlights:

Insider Trader: It’s been a pretty tough time lately for medical device maker AngioDynamics (ANGO). The company cut its full-year guidance due to a $46 million acquisition and then earlier this month the CFO suddenly resigned. Shares have plunged 24% year to date. However, the CEO recently bought 15,000 shares. Tracey considers this a “confidence” buy. She decided to add ANGO on Thursday with a 10% allocation. The editor also sold United Rentals (URI) and Intel (INTC) for gains of 19.7% and 9.6%, respectively, in approximately 2 months. Read the full write-up for a lot more on today’s moves.

Value Investor: Pot stocks have been getting beaten up over the past few months as Canada experiences “growing pains”. However, Tracey understands that’s normal for an emerging industry and that the market is “throwing out the baby with the bath water”. For example, shares of Innovative Industrial Properties (IIPR) are down 27% over the past 3 months. The company is a REIT that specializes in cannabis facilities. In other words, it’s the real estate side of the pot industry and one of the few American pot stocks at the moment. It currently owns 38 properties and will buy more as new states legalize medical marijuana. The editor decided to add this Zacks Rank #1 (Strong Buy) before its quarterly report on Nov 6 because she expects shares to catch a bid after a solid performance. Read the full write-up for a lot more on the addition of IIPR.

Home Run Investor:
"It has been a while since we saw trade talks really impact the market. So the word is that the Chile summit is over and now there are concerns that China will even ink a deal at all.

"The market should be down substantially if that was really true – and I have to think that the allure of getting a phase 1 done that limits all tariffs is something that they would like to see. For that reason, the markets didn’t cascade lower and basically held serve.

"Lately I have been talking about the relative strength in the market… and there are still plenty of indications out that the market is going to be heading higher.

"I see 306 new highs with 151 new lows, so that 150 net number is right about where we want to see it. That to me is bullish."
-- Brian Bolan

Happy Halloween!
Jim Giaquinto

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