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Stocks Not Happy About Talk of Trade Deal Delay

Jim Giaquinto

The market didn’t do much on Tuesday to dispel fears of another December selloff, as stocks have now slipped for three straight days and shed approximately 2% in that time.

However, the indices did come well off their lows before the closing bell. If this really were some kind of December 2018 redux, we would have seen the losses get worse as the day progressed.

The market dropped today because it didn’t like President Trump suggesting that a trade deal could be put off until after the 2020 election!

In other words, those additional tariffs scheduled for Dec. 15 would happen and we’d all enjoy nearly a year more of trade uncertainty.

But the market recovered a decent amount of the tumble. The President’s statement seemed to be one of those spur-of-the-moment-type things that he’s known for, rather than something official. So, we’re probably no further away from a deal than we were yesterday, though it’s impossible to tell how close we were to begin with.    

In the end, the Dow was only off by 1.01% (or around 280 points) to 27,502.81. The index had plunged well over 400 points at its worst.

The S&P was off 0.66% to 3093.20 and the NASDAQ slipped 0.55% (or around 47 points) to 8520.64.

Therefore, the indices have lost approximately 2% in the past three sessions. Last year’s December selloff could do more than that in one day!

Most likely, we’re just moving through the sell-off that many of the editors expected after running so quickly to new highs. It would be a normal pullback, which is an adjective you wouldn’t use for last December’s catastrophe.

In addition to its susceptibility to trade headlines, the market will also have to deal with some potentially important economic data on Wednesday. The ISM Services and ADP employment reports are scheduled for tomorrow.

Let’s see what happens!   

Today's Portfolio Highlights:

Counterstrike: Shares of Shoe Carnival (SCVL) spiked to $44 after its “monster” quarterly report late last month, which included a positive EPS surprise and a raised outlook. However, this Zacks Rank #1 (Strong Buy) footwear retailer has slipped back into the mid-$30s and right into Jeremy’s wheelhouse. The best part about this pick is that an “absurd” amount of shorts are betting against it, so its poised to soar higher on any good news. The editor added SCVL on Tuesday with a 10% allocation. Read the complete commentary for more on this new buy and to take a look at its chart.

Stocks Under $10: When you’re buying stocks in December, Brian says you’re really looking for performance in 2020. That’s why he added Chimerix (CMRX) on Tuesday. This Zacks Rank #1 (Strong Buy) biotech name works on innovative medicines to treat cancer and other serious diseases. The first quarter of 2020 will be big for the company, as a Phase 2 trial is coming to an end and a Pre-NDA meeting is scheduled for a smallpox drug. The editor added CMRX as part of a healthcare swap; he also sold the underperforming Owens & Minor (OMI). The new buy has a good-looking chart and could be poised to move past $3.  

By the way, the portfolio also decided to sell Realogy (RLGY) for a 45.6% return in less than two months and Quotient Technology (QUOT) for a 24.4% profit in a little more than one month. Brian held onto both of these names even though they slipped to low Zacks Ranks, but now he decided it was time to harvest the gains. Read the full write-up for more on today's moves. 

Surprise Trader: Most of the time you bet on the horse… but sometimes you bet on the jockey. Dave’s addition of RH (RH) on Tuesday is an example of the latter, as he likes the passion of CEO Gary Friedman. Of course, there are plenty of customers who are passionate about RH too, which is why the editor considers this a “cult” stock. This Zacks Rank #1 (Strong Buy) luxury home furnishings retailer has a positive Earnings ESP for the quarter coming after the bell tomorrow. Dave added RH on Tuesday with a 12.5% allocation. He also sold the underperforming Jacobs Engineering (JEC) to make room. Read the full write-up for more. 

Zacks Short List: This week's adjustment included only one swap. The service short-covered PTC Inc. (PTC) and replaced it by adding Baozun (BZUN). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Until Tomorrow,
Jim Giaquinto

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