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Solid Earnings AND a Patient Fed Spark Sharp Rally

Jim Giaquinto

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That was the best day we’ve seen in a while! The major indices soared on Wednesday thanks to a few solid earnings reports and a very dovish Fed. The only thing that could’ve made this session even better was a trade deal… and officials from the U.S. and China are working on that right now.

The market was thrilled with the not-as-bad-as-feared Apple report from last night. The iPhone maker jumped 6.8% and brought the rest of the technology space along with it. Also, airplane maker Boeing easily eclipsed expectations and posted annual revenue of more than $100 billion for the first time ever. The stock was up 6.25%.

It was pretty much the mirror image of Monday’s session, when softness at NVIDIA and Caterpillar hurt the market. But today, other technology and industrial leaders helped us reverse course after a couple of milquetoast sessions.

The major indices were well on their way to a strong session, but then “Patient Powell” showed up and gave the rally another gear. The Fed had been trending more dovish of late from perceptions last year that they were going to hike rates regardless of how the market reacts. But on Wednesday, the Fed Chair reiterated even more strongly that it would show patience moving forward and that the case for raising rates has weakened. The market loved it!

The NASDAQ more than made up for its losses over the past two days, as it surged 2.2% (or nearly 155 points) to 7,183.08. The index is now in a good position to continue its weekly winning streak, especially with Facebook surging more than 12% afterhours thanks to a solid quarterly report. However, shares of Microsoft are down over 4% as of this writing after beating earnings but missing on revenues.

The Dow reclaimed 25,000 for the first time in nearly 2 months with a rise of 1.77% (or nearly 435 points) to 25,014.86. The S&P increased 1.55% to 2681.05.

The big report tomorrow will be Amazon, though like the other FAANGs it will not come until after the close. With earnings season being good enough and the Fed suddenly popular in the market, investors will be watching the trade negotiations in Washington very closely. A deal between the world’s two biggest economies would be just what the market needs to fully recover from last year's correction.

“It feels to me like we are poised to make a run at new all-time highs once this trade deal gets done. Without a deal, I fear that things could get ugly in a hurry,” said Dave Bartosiak.

Today's Portfolio Highlights:

Surprise Trader: There are some big and well-known companies reporting earnings this week… and some of them are going to find their way into this portfolio. For example, Dave picked up Take-Two Interactive (TTWO) today, which is one of the most popular video game developers with famous franchises like Grand Theft Auto and Red Dead Redemption. This Zacks Rank #1 (Strong Buy) is reporting before the bell next Wednesday and hasn’t missed since August 2015. With a positive Earnings ESP of 3.36%, the editor feels this trend will continue next week. He added TTWO on Wednesday with a 12.5% allocation. Read the complete commentary for more and be ready for another buy tomorrow.

TAZR Trader: Shares of Apple (AAPL) may be bouncing in the wake of its quarterly report last night, but Kevin feels the stock is on its way to a Zacks Rank #5 (Strong Sell) and will likely see $150 before $170. Basically, the editor believes this positive reaction is a response to a better-than-feared quarter rather than a good one. He’s backed up by several analysts who believe AAPL’s iPhone troubles will continue, especially in China. Therefore, Kevin decided this was a great opportunity to short Apple with a 7% allocation. Read the full write-up for a lot more on this move.

Options Trader: For the past four years now, Genuine Parts (GPC) has been tracing out a big, bullish symmetrical triangle pattern. Kevin believes this automotive replacement parts company is finally ready to break out. The editor likes the look of its chart pattern and appreciates its projected sales growth of 4.5% and its projected EPS growth of 6%. On Wednesday, he bought to open 2 August 100.00 Calls in GPC. Read the full write-up for more specifics on this move.

Healthcare Innovators: The portfolio pulled another nice profit out of Edwards Lifesciences (EW). Kevin sold this TAVR (transcatheter aortic valve replacement) technology company on Wednesday for a 19.7% return, marking the service’s second double-digit profit in less than a year. EW reports earnings after the bell tomorrow and usually sells off after reporting. There’s even more risk for investors after a brokerage recently lowered estimates for the TAVR market and EW itself. Therefore, Kevin is taking the money and moving on.

All the Best,
Jim Giaquinto

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