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Stocks Slide to Start September

Jim Giaquinto

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The major indices pulled back on the first day of September due in large part to trade concerns, which is eerily similar to the way they began the difficult month of August. 

The NASDAQ slipped 1.11% (or approximately 88 points) on Tuesday to 7874.16, while the Dow dropped 1.08% (or around 285 points) to 26,118.02. The S&P was off 0.69% to 2906.27. 

Stocks are coming off their first positive week in a month. The Dow jumped 3% last week with the other major indices advancing by just under that mark. 

But its going to be tough to repeat now that this week begins in a hole with only three more days to climb out. 

We knew this would probably be a rough session because the U.S. and China were scheduled to put new tariffs on each other over the weekend. And they did. There were no delays from either side to grease the wheels for a future meeting. 

Therefore, we’re left wondering if there will be any get-togethers between the two sides this month to try and bring this year-long trade conflict to an end. President Trump still thinks it’s possible. 

As if that weren’t enough, the ISM’s U.S. manufacturing index showed its first contraction in over three years. It came down to 49.1%; anything below 50% suggests contraction.

That’s not what a market worried about recession wants to hear. Hopefully, the Government Employment Situation report on Friday will be more cooperative.   

Last month started with a trade-induced selloff as well and turned into a rough time for investors. Despite the strong ending, the NASDAQ still slipped by 2.7% in August while the other major indices were down by nearly 2%. 

And September isn’t known for being a strong period in the market. But a good headline or two could certainly change sentiment and keep history from repeating itself.  

Remember, it’s not where you begin that’s important… it’s where you end!

Today's Portfolio Highlights:

Surprise Trader: This portfolio has enjoyed some big wins from the retail space of late, so that’s where Dave is staying for today’s addition. Zumiez (ZUMZ) is from the Retail – Apparel & Shoes space, which places it in the Top 35% of the Zacks Industry Rank. This Zacks Rank #2 (Buy) has an excellent history of beating the Zacks Consensus Estimate, and it looks like that impressive trend will continue in the next report this Thursday after the bell. ZUMZ has a positive Earnings ESP of 12.5% for the report. The editor believes the momentum will continue, so he added the stock on Tuesday with a 12.5% allocation. He also sold Seaspan (SSW) for a more than 5% return in just a little under a month. Read the full write-up for more on today’s moves.  

Stocks Under $10: These trade-induced selloffs almost always turn into buyable events, according to Brian. Therefore, he used today’s pullback to pick up Frontline (FRO), a Zacks Rank #1 (Strong Buy) shipping company that’s highly sensitive to trade talk headlines. The editor thinks the stock is also highly sensitive to a rebound on more encouraging news, especially since it has been holding up rather well amid all the drama between the U.S. and China. For example, FRO has beaten the Zacks Consensus Estimate in three of the last four quarters, amassing an average earnings surprise of 20% in that time. Read the complete commentary for a lot more on this new addition. 

Marijuana Innovators: The portfolio added Cara Therapeutics (CARA) on Tuesday, which is an innovative pharmaceutical company that's developing a cannabinoid receptor treatment for pain relief. Read the complete commentary to learn all about this new addition.

Zacks Short List:
The portfolio replaced three positions in this week’s adjustment. The stocks that were short-covered included:  

• Palo Alto Networks (PANW)
• Qualcomm Inc. (QCOM)
• Sina Corp. (SINA)

The new buys that replaced these names are:  

• GrubHub (GRUB)
• Salesforce.com (CRM)
• World Wrestling Entertainment (WWE)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Black Box Trader: There are six swaps in this week’s adjustment, which is coming a day late due to Labor Day. The positions that were sold today included:    

• CBRE Group (CBRE)
• Pilgrim’s Pride (PPC)
• MasTec (MTZ)
• Rent-A-Center (RCII)
• United Airlines Holdings (UAL)
• Diebold Nixdorf (DBD)

The new buys that filled these spots on Tuesday were:   

• Arconic (ARNC)
• DaVita (DVA)
• General Motors Co. (GM)
• Guess (GES)
• NRG Energy (NRG)
• Skechers USA (SKX)

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

Until Tomorrow,
Jim Giaquinto

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