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Slow Start to Busy Earnings Week

Jim Giaquinto

This quiet trading session belies just how chock-full of earnings this week is going to be. Despite entering the thick of the season, the major indices still didn’t move much on Monday.

We can blame some of this tepidness on returning from the long Easter weekend… but that’s not the whole story. The market has experienced numerous low volume sessions of late. It’s still waiting for a catalyst to spark the next leg higher that will take stocks to new all-time highs.

It may not have to wait much longer.

“The picture emerging from the Q1 earnings season is a lot more favorable than many in the market feared just a few weeks back,” said Director of Research Sheraz Mian in today’s Zacks Confidential.

We’ll have a much better idea about this season’s character in the coming days, as we’re scheduled to get reports from the likes of Amazon, Facebook, Microsoft, Caterpillar and 3M, just to name a few.

Most companies that have reported thus far managed to beat lowered expectations. But investors know not to stick their necks out too far and too soon in an unpredictable earnings season that is expected to slow down from recent quarters.

So for now we get to yawn our way through another lackluster session.

The NASDAQ enjoyed the best performance on Monday thanks in large part to a nice 4.7% jump in Netflix. The market has apparently gotten over the streaming giant’s softish revenue outlook for the second quarter. The index was up 0.22% and back over 8,000 to 8015.27.

The S&P may be stuck at the moment, but at least it’s stuck above 2900. The index gained 0.10% on Monday to 2907.97. However, the Dow finished the day lower by 0.18% (or nearly 50 points) to 26,511.05, though it was off by 100 points at its worst.

So the market stands ready to be impressed. Will this week be up to the challenge? We’ll soon find out…

Today's Portfolio Highlights:

Surprise Trader: A fresh, new and full week of earnings season starts today… and Dave kicked things off by buying a 12.5% allocation in Juniper Networks (JNPR). This Zacks Rank #2 (Buy) is part of the wireless equipment industry, which is in the Top 14% of the Zacks Industry Rank. Also, it has an Earnings ESP of 10% for the quarter coming after the bell on Thursday. JNPR is stuck in a choppy range around the mid-$20s, but the editor thinks it could shake loose from the malaise after a positive beat and good guidance. Read more in the full write-up.

Technology Innovators: Usually, Brian Bolan is all about growth. But he’s been adding more value to his portfolios of late, which continued today with NCR Corp. (NCR). This Zacks Rank #2 (Buy) is in the payments space, but it doesn’t grab headlines like Square and Paypal. Its more of a volume-style player that makes and maintains point-of-sale terminals, ATMs and self-ordering kiosks. It has a great history of beating the Zacks Consensus Estimate with an average positive surprise of 10.8% over the past four quarters. It will report again on May 7. And as mentioned above, it’s a great value play. The editor is especially impressed that NCR is a slow and steady topline performer. Read the complete commentary for more on this new addition and don’t be surprised if this is a busier-than-usual week of buying and selling for the portfolio.

Black Box Trader: Half the portfolio was swapped out in this week's adjustment. The stocks that left the portfolio on Monday were:

• PDC Energy (PDCE, +5.3%)
• V.F. Corp. (VFC, +4.2%)
• NXP Semiconductors (NXPI)
• Hilton Worldwide (HLT)
• First BanCorp (FBP)

The new buys that replaced these names are:

• Darden Restaurants (DRI)
• Principal Financial (PFG)
• AES Corp. (AES)
• Tronox Ltd. (TROX)

Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.

All the Best,
Jim Giaquinto

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