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Strong GDP Helps S&P, NASDAQ Back to New Highs

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Two of the major indices go into the weekend with record closing highs after a strong GDP print amid a better-than-expected earnings season.

Stocks started the session in the red despite the solid economic data, but you can’t keep a good market down. By the closing bell, the S&P managed a 0.47% advance to a new peak of 2939.88.

The NASDAQ had to deal with a 9% plunge in Intel after the chipmaker offered a soft earnings outlook in its quarterly report after the bell yesterday. However, the index fought through that disappointment and made its own history with a rise of +0.34% to 8146.4. (By the way, Amazon gained a little more than 2.5% in the session after crushing quarterly earnings estimates.)

The Dow is still trying to make its own new highs, but it always seems to get tripped up. Yesterday it was 3M and today it was Exxon Mobil. Nonetheless, it participated in the trend higher on Friday and advanced 0.31% (or about 81 points) to 26,543.33.

The NASDAQ climbed nearly 2% this week, while the S&P advanced more than 1%. The Dow was slightly in the red.

And what a week it was! Investors have been coming around to the idea that the quarterly reports aren’t a disaster. To be fair, earnings season isn’t what it used to be, but nor is it what many had feared when expectations started to be lowered. As a result, the S&P and NASDAQ each hit new highs on Tuesday (completely filling the hole left by the late 2018 correction) and then reached records again today.

For a little icing on the cake, the GDP report for the first quarter came in at 3.2% on Friday, which trounced expectations between 2.2% and 2.5%. That’s a nice reading for an economy that many thought was in trouble and on the way to a recession just a few months back. And let’s not forget that there’s supposed to be some kind of trade deal with China coming down the road in the near future.

Next week promises to be just as full. We’ll get reports from the remaining two FAANG names (Alphabet and Apple) early in the week and of course we’ll have the jobs number on Friday… just to name a few events. So rest up over the weekend knowing that stocks are at their highs and we’ll be back at it on Monday.

Today's Portfolio Highlights:

Value Investor: One of Tracey’s favorite barometers of the U.S. economy is the equipment rental space. Therefore, the 18-cent beat for H&E Equipment (HEES) yesterday really caught her attention. This Zacks Rank #1 (Strong Buy) is one of the large integrated equipment services companies, focusing on heavy construction and industrial equipment. Shares have soared 50% year to date (which is an encouraging sign for the economy), yet the editor notes that it is still cheap with great value characteristics. In addition to all this, HEES is a rare small cap that pays a dividend, currently yielding 3.8%. Tracey sees potential for further upside, so she added the stock to the portfolio on Friday. Read the complete commentary for more.

Stocks Under $10: The portfolio hasn’t taken full advantage of rising oil prices because Altus Midstream (ALTM) has “dramatically underperformed”. So Brian Bolan decided to do something about it before the weekend. He sold the stock and replaced it with Chaparral Energy (CHAP), a Zacks Rank #2 (Buy) E&P company that appears on its way back to its February level of $8. It has a decent earnings history with estimates that are moving generally higher. Most importantly though, the editor feels that CHAP will move with oil and provide better exposure to the space. Read the complete commentary for more and be ready for another addition on Monday.

Healthcare Innovators: Genetic testing is an exploding frontier of medical diagnostics where Kevin already owns the “NASA of Biotech,” Illumina, the $45 billion genomics exploration company behind 23andMe, Ancestry.com, and hundreds of biotechnology research labs. Today, the editor decided to grab a much smaller player, Invitae (NVTA), that provides medical diagnostics for several hereditary disorders and cancers and just became one of seven preferred testing labs for insurer UnitedHealthcare. NVTA sales are expected to hit $224 million this year, which marks impressive momentum of 108% CAGR from $25 million in 2016. And the rapid growth for this innovator is expected to sustain in a market with potentially 300 million patients who are covered by insurance for genetic testing and increasingly interested in their roots, health, and propensity for disease. However, the editor cautions that investors should not take a full position just yet since NVTA has rocketed by 50% since their Feb earnings. Read the complete commentary for more on this new addition, including some insight from analysts.

Have a Great Weekend!
Jim Giaquinto

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