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Too Much Talking, Not Enough Action

Jim Giaquinto

Stocks largely recovered from a sharp drop on Wednesday morning, but two of the major indices still finished the session in the red as we comedown a bit from two straight weeks of trade giddiness.

The NASDAQ managed a complete recovery as the index finished with a gain of 0.07% to 7554.51. The S&P couldn't quite match its counterpart as 2800 remains elusive. It was off 0.05% to 2792.38.

The Dow dropped 0.28% (or nearly 73 points) to 25,985.16. However, the index recovered from a loss of about 180 points at its worst.

It was a busy news day but nothing that really moved the market that much, including the testimony of President Trump's former attorney Michael Cohen that the press is obsessing over. The one thing the market may have reacted to was U.S. Trade Representative Robert Lighthizer's remark to Congress that a trade deal with China was not a sure thing yet and that the "process" could still take a while.

However, after his Congressional testimony, Mr. Lighthizer stated that the increase in tariffs on Chinese goods could be officially abandoned if the two sides continue talking. This provides a nice one-two punch with the President's recent decision to push back the March 1 deadline.

The market has been feeling good about a trade deal for a while now, but that can't last forever. So despite Mr. Lighthizer's comments and other geopolitical concerns, the main culprit for the last few days of sluggishness is probably just the amazing runup we've seen so far in 2019. Now we could use something real. Even if most of a trade deal is priced in already, it's important to put this issue in the past and move forward

One more thing. You know who else was talking to Congress on Capitol Hill today? Fed Chair Jerome Powell. As with yesterday, he didn't shock the market with any of his comments so there was no impact.

Today's Portfolio Highlights:

Home Run Investor: It may seem like Healthstream (HSTM) is just another tech name since it is a software/Internet stock. But this one is focused on the healthcare sector, which has been doing very well of late. Brian Bolan considers this to be another play that helps diversify the portfolio. HSTM beat on both the top and bottom lines in its report from earlier this month. The editor was especially pleased that the company also boosted its guidance. He believes the stock is all set for a solid post earnings drift higher, so he added it on Wednesday. Read the full write-up for more.

Surprise Trader: Basketball season is in full swing, so Dave felt like this was a good time to buy athletic shoe staple Foot Locker (FL). More importantly though, the company has a positive Earnings ESP of 1.2% for the quarter coming before the bell on Friday. The editor believes that FL should have strength this quarter as well as next quarter. After selling Xencor (XNCR) for a return of 0.6%, he put the portfolio's remaining cash into FL. Read the complete commentary for more.

Healthcare Innovators: A week after a "nice win" from the FDA, Tandem Diabetes (TNDM) is back in the news after reporting a great beat-and-raise quarter. This small medical technology company shipped 16,168 pumps in Q4, which is 133% better than last year. It's no wonder why TNDM raised its guidance. It's a good thing Kevin added the stock last Wednesday, because it gave him the best performer of the day with a surge of 24.3%. By the way, this portfolio had three of the top five winners thanks to solid results from Sarepta Therapeutics (SRPT, +8.2%) and Jazz Pharma (JAZZ, +8%) after encouraging data and a strong quarter, respectively.

Technology Innovators: The market isn't paying much attention to IT solutions provider Sapiens International (SPNS), but Brian Bolan thinks that will change after its solid beat and raise quarter from yesterday. The editor was most impressed with the topline guidance, as the company expects fiscal year 2019 revenue between $318 million and $323 million. The consensus was only at $305 million. Margins are moving higher as well. The market should be waking up to SPNS sooner rather than later, which was why Brian added it on Wednesday. Read the full write-up for more and get even more detailed analysis in tomorrow's report.

Until Tomorrow,
Jim Giaquinto

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