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New Selloff, Old Concerns

Jim Giaquinto

Another sharp selloff on Thursday wiped out most of the gains from Tuesday’s rally, as the market continues to struggle during a rough month of October.

The NASDAQ again took the brunt of this pullback with tech still not acting like itself. The index slipped 2.06% (or about 158 points) to 7485.14. Netflix took its cue from the general market today by dropping 4.93% and almost negating yesterday’s 5.3% rise on strong subscriber growth. The rest of the FANGs were also off by more than 2% each.

The S&P has a big stake in tech as well (along with other industries that dropped today), which led the index to a slip of 1.44% to 2768.78.

The Dow plunged 1.27% (or about 327 points) to 25,379.45. When adding the 91 points it lost yesterday, we’ve said goodbye to the lion’s share of Tuesday’s 550-point jump.

The market is still dealing with the same old concerns it’s had for the past several weeks and months, namely rising rates, trade and slowdown fears. But there’s a few other factors rattling the market’s cage as well, which isn't very hard to do amid all these uncertainties.

Mario Draghi, President of the European Central Bank, warned that undermining EU budget rules threatens the well-being of all the members. Though he didn’t single anyone out, everyone knew he was talking about Italy and the danger of that country’s budget deviating from the union’s fiscal rules. So, we may be having a bit of a flashback from the Greece problem of a few years ago.

The market is also paying attention to what the Trump Administration may do about the likely killing of Saudi Arabian journalist Jamal Khashoggi. Treasury Secretary Steven Mnuchin said he would not be participating in an investment conference in that country. Later, President Trump said it “certainly looks” like the writer is dead and that there would be “very severe” consequences if it turns out that the government is responsible. Needless to say, if the U.S. puts sanctions on Saudi Arabia, it would complicate business between the two countries.

We’ll learn more about both of these issues in the coming days. We’ll also be getting a lot more earnings reports. As expected, the season has been solid thus far, though the market hasn’t been rallying on the news. Let’s hope that changes and that the second half of October can be more profitable than the first. 

"The brutality is likely to subside during this earnings-driven time. As long as earnings can keep solid, this market is likely to rebound nicely. That doesn’t mean I’m going to go out here and try to catch falling knives but I can’t help but move when an opportunity presents itself," said Dave Bartosiak, editor of Surprise Trader, Momentum Trader and Blockchain Innovators.

Today's Portfolio Highlights:

Surprise Trader: Given the strong U.S. consumer and small business optimism, Dave was persuaded to make another quick turnaround trade by adding American Express (AXP). This Zacks Rank #2 (Buy) credit card company reports after the bell today. The editor feels good about tonight's report due to the current economic environment and the company’s string of positive earnings surprises. Therefore, he added AXP on Thursday with a 12.5% allocation. Read the complete commentary for more on all of today’s moves, including this addition and a couple of sells.

TAZR Trader: The market is hyperventilating these days over China, interest rates and slowdown fears. But over the next week, there will be some giants reporting quarterly results, including Honeywell, Caterpillar, Amazon and Google. Kevin thinks this is a good time to buy this pullback, so he added Direxion S&P 500 3X Bull ETF (SPXL) today with a 7% allocation. The idea here is not to buy at the exact low of this correction, which won’t really be known until its all over. Instead, the editor says that buying in the lower third will generate more than enough positive returns. Read his complete commentary for more.

Insider Trader: "President Trump acknowledged for the first time that the journalist Jamal Khashoggi was probably dead and warned of possible severe consequences if it was linked to the Saudis. This could have big market implications. The Saudis could wrench havoc with the oil market, obviously, at the same time that the US puts sanctions on Iran. Those sanctions, which include oil, are expected to begin on Nov 4.

"Most expect some "waiving" of the sanctions, especially for countries like India which gets most of its crude from Iran and is one of its biggest customers. But it's unclear if the Trump administration will waive it. That would mean a really tight oil market as most of the Iranian oil would come off the market.

"And if the Saudis also lowered production at the same time? The price of crude could skyrocket, which would inflict more pain on the global economy which is already dealing with other rising commodity costs and, in the US, higher labor costs.

"Let's see what happens. It's a bubbling "crisis" though and it won't go away by tomorrow's open."
-- Tracey Ryniec

All the Best,
Jim Giaquinto

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