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Stocks Slump as Trade Talks Cancelled

Jim Giaquinto

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After two consecutive sessions of new highs and a more than 2% weekly advance, the Dow took a step backward on Monday. It slipped by more than 180 points after trade talks between the U.S. and China broke down over the weekend. And it didn’t help that Deputy Attorney General Rod Rosenstein may be on the way out, though political turmoils have proven to be temporary in the past. 

The Dow declined 0.68% today to 26,562.05. According to news reports, China pulled out of planned trade talks with the U.S. Both sides recently implemented new tariffs...though they were significantly watered down from expectations. The market hoped this was a sign that the two sides could get together and find a way through this trade impasse, and it looked like it would happen. But apparently not. Not yet, at least. The Dow took it the hardest. 

“I find it hard to worry about this given the market's performance over the last week, despite the tariffs going into effect, the market doesn’t really care that much. While the VIX was higher off the open, it closed in the red, showing hardly any fear. Looking for long opportunities is still the way to go,” said Jeremy in Counterstrike

While its counterparts were setting new highs last week, the NASDAQ was lagging behind. But today it was the only Big 3 index in the green. Though spending most of the day in the red, it advanced enough by the closing bell to finish with a slight increase of 0.08% to 7993.25. The FANGs were back in the green, led by Netflix and its 2.33% rise. 

The S&P, which set a new closing high on Thursday and a new intraday high on Friday, also took a break by slipping 0.35% to 2919.37. 

And then there’s that Rosenstein thing, which actually got most of the press on Monday. It appears to be another case of confusion in the beltway that we’ve become accustomed to and that the market usually ignores. President Trump, who’s in New York right now, and Mr. Rosenstein will meet on Thursday when we should get an answer one way or another. Let’s hope the market gets back to focusing on this solid economy until then. 

Today's Portfolio Highlights: 

Technology Innovators: On Monday, SiriusXM bought Pandora for $3.5 billion in an all-stock deal! Brian Bolan considers that to be “a heck of a premium”. And if Pandora is worth THAT much, then he thinks Spotify (SPOT) is quite a bit undervalued. SPOT is one of the bigger players in the music streaming business and is also Brian’s personal favorite in the space. The company’s numbers aren’t that impressive...but its technology is. The editor thinks this deal will be a boon for SPOT, so he added it to the portfolio. Read the complete commentary for more.

Black Box Trader: Half of the portfolio was changed in this week’s adjustment. The stocks that were sold included:

• Archer Daniels Midland (ADM)
• The Progressive Companies (PGR)
• CF Industries (CF)
• Keysight Technologies (KEYS)
• D.R. Horton (DHI)

The new buys that replaced these names are:

• Aflac Inc. (AFL)
• Allegheny Technologies (ATI)
• Molina Healthcare (MOH)
• Tilly's Inc (TLYS)
• United Rentals (URI)

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

Zacks Confidential: Wouldn’t it be great if you had a roomful of experts to help you figure out what’s happening in the market and which stocks to buy? Well, John Blank actually does in a way! Four times a year for the past six years, he has been conducting a survey of CIOs (Chief Investment Officers). One such sample was recently completed, and Kevin asked John to make it the focus of this week’s Zacks Confidential. Find out what John learned and get three stock picks by clicking: Let Chief Investment Officers Light the Way. 

All the Best,
Jim Giaquinto

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