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Stocks Bounce Back from Retail Sales Surprise

Jim Giaquinto

The market responded to real economic data on Thursday instead of good vibes from trade negotiations thousands of miles away. Unfortunately, that data was weaker-than-expected retail sales, which led to a sharp morning selloff. But the major indices calmed down and ended the session well off its lows.

The NASDAQ actually came all the way back to finish higher by 0.09% to 7426.95. The big news was Amazon deciding not to open a second headquarters in New York City after local officials complained about the billions of dollars in subsides offered to the e-commerce leader. Shares of Amazon were only down a little more than 1%.

After the bell, chipmaker NVIDIA announced better-than-expected earnings that have sent shares higher by more than 8% afterhours (as of this writing).

The Dow more than halved its earlier loss and finished lower by 0.41% (or nearly 104 points). The S&P’s winning streak came to an end, but it, too, had a nice comeback and was off only 0.27% to 2745.73.

The big weight around the market’s neck today was retail sales dropping 1.2% in December, which is way off expectations for a very slight increase. It’s certainly an odd number, though, as no other data is showing anything close to this sharp a slowdown. The market ended up taking the news rather well as shown by its rebound from the morning selloff. It’s going to take more data to know if this retail reading is a cause for concern or just a glitch exacerbated by a government shutdown and sharp market correction.

And now back to the negotiations we’ve been talking about all week. President Trump plans to sign the deal worked out in Congress and then declare a national emergency to get the funds for a border wall. This declaration opens a whole new source of drama in Washington, but at least we won’t be getting another government shutdown.

In China trade negotiations, we heard again that the President is open to extending the trade deadline. Bloomberg News reported that he’s considering pushing it back 60 days. Meanwhile, as mentioned yesterday, President Xi of China may soon be meeting with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.

Now we head into Friday with each of the major indices up more than 1%, which puts stocks in a great position to extend their winning streak to 8 straight weeks.

Today's Portfolio Highlights:

Technology Innovators: It’s always a big deal when a portfolio sells its best-performing stock, which is what we saw today when Brian Bolan sold Okta (OKTA) on Thursday. This software name had a nice run since being added back in April 2018, but the editor is all about taking profits more frequently these days. Therefore, OKTA was sold today for a return of 110.2%.

Security software names are hot right now, and Brian wants more exposure to the space. Therefore, he filled the newly-opened spot today by buying Proofpoint (PFPT), a Zacks Rank #2 (Buy) that has jumped to $120 from $95 in just the past month. The stock added more than 10% after an earnings surprise and a raised guidance in its most recent report. It doesn’t usually rise so much after reporting, but the editor thinks this could be the start of a new trend. Read the full write-up for more on today’s moves.

Blockchain Innovators: Shares of Conduent (CNDT) have jumped more than 30% since it hit bottom with the rest of the market on Christmas Eve. And its still well off its highs! Dave sees potential in this business process services company, which uses blockchain, among other technologies, to create digital platforms and services for its customers. CNDT has a positive Earnings ESP for the quarter coming next week and could be primed for a sharp move higher if it fills the post-earnings gap. Read the full write-up for more on this new addition.

TAZR Trader: Software is “invincible” right now, so Kevin went to this industry for his latest addition to the portfolio. But he’s not picking one of the overvalued momentum names. Instead, the editor added a small, unheard of player named Upland Software (UPLD), which is expected to grow sales by 29% this year and EPS by 22.5%. This cloud-based Enterprise Work Management software provider recently moved past its 40-week moving average at $32-$33, and the editor believes the market will start paying attention to UPLD as it moves past its old highs at $37-$38 and toward Wall Street targets at $41. Learn a lot more about this new addition in the full write-up.

Surprise Trader: The portfolio is heading to the movies with today’s pick of The Marcus Corp. (MCS), a Zacks Rank #1 (Strong Buy) that has beaten earnings expectations for the past two quarters. The company, which also owns and operates hotels along with movie theaters, seems set to continue that streak given its positive Earnings ESP of 1.45% for the quarter coming before the bell next Thursday. Dave added MCS today with a 12.5% allocation and sold World Wrestling Entertainment (WWE) for a gain of 7.7% to make room. Read the complete commentary for more.

Have a Great Evening,
Jim Giaquinto

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