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Stocks Still Looking for the Bottom

Jim Giaquinto

It would’ve been nice to have a happy ending to this difficult week, but we didn’t get one on Friday. The indices were down sharply again as this correction continues, though they did come off their lows by the closing bell.

We knew tech would likely remain under pressure after the quarterly reports from Amazon and Alphabet after the bell yesterday. Both companies beat earnings expectations, but fell short on the revenue side. As a result, AMZN was down 7.82% today and GOOG was off 2.2%. The other FANGs were in the red as well.

The NASDAQ ended lower by 2.06% to 7167.21, bringing its weekly loss to approximately 4%. The S&P, which has a lot of exposure to tech in its own right, declined by 1.73% to 2658.69. It was also down by about 4% this week.

The Dow plunged more than 500 points at its worst today, but it recovered about 200 by the end. The index finished lower by 1.19% (or 296 points) to 24,688.31. The weekly loss was around 3%.

So, the market hasn’t hit a bottom yet that we can tell. Every rally this month that could’ve possibly marked the end of the pullback turned out to be a head fake. Fortunately, the economy is still strong, as evidenced by a better-than-expected first read of Q3 GDP at 3.5%, compared to the forecast at about 3.4%.

Once investors get over their fears and realize how much the market is oversold, we should be in store for a solid rebound. But no one knows when that will be. Fortunately, October comes to an end on Halloween next Wednesday. Good riddance!!!

Today's Portfolio Highlights:

Counterstrike: OK, enough is enough. This morning’s sharp selloff has Jeremy thinking that the market is waaaaay oversold. Therefore, he’s buying into the panic with a 12% allocation in Atlassian Corp. (TEAM). This Zacks Rank #2 (Buy) designs, develops and licenses software and software hosting services. The stock is off more than 30% in this selloff, but even beforehand high-frequency traders were knocking the stock lower despite a 5% earnings beat. The editor thinks TEAM is bound to move higher once the market gets a hold of itself. Read the complete commentary for more.

Surprise Trader: The NASDAQ has gotten massacred in this selloff, so it should be poised for a significant rebound once the bottom is reached. With that in mind, Dave wanted a “four-letter addition” for the portfolio’s next move. He bought a 12.5% allocation in SS&C Technologies (SSNC), a Zacks Rank #1 (Strong Buy) investment and financial management software company. It has a positive Earnings ESP of 8.8% for the quarter coming after the bell on Wednesday. Earnings estimates for SSNC have been on the rise over the past 90 days. The portfolio also sold a couple names today. Learn more about all of the moves in the full write-up.

TAZR Trader: It looks like the market isn’t done selling off yet, just as Kevin predicted. The editor isn’t sitting on the sidelines, though, and waiting for the rebound. He plans to make money even when the market isn’t cooperating. First of all, he bought a 10% allocation in ProShares UltraPro Short Dow30 ETF (SDOW) to capitalize on this new leg of the correction.

Meanwhile, biotech has actually been holding up rather well during today’s pullback. The IBB is still underperforming the SPX of course, but it has managed to keep from setting new lows. The editor considers this to be very encouraging and could be signaling a sharp rebound when the market finds its footing. Therefore, he also bought ProShares Ultra Biotech 2X Bull ETF (BIB) on Friday. Read the full write-up for more.

Have a Great Weekend,
Jim Giaquinto

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