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The Wait is Almost Over

Jim Giaquinto

Remember, the April episode of the Zacks Ultimate Strategy Session is now available for viewing! Don’t miss your chance to hear:

• Sheraz Mian and Dr. John Blank Agree to Disagree on whether the end of the U.S. – China trade war will spark a new leg in the bull market
• Kevin Matras answers your questions in Zacks Mailbag
• Sheraz and Kevin Cook choose one portfolio to give feedback for improvement
• Market conditions from both fundamental and technical views
• The full list of top-performing stocks over the past 30 days
• New stocks added to the ZU portfolio
• And much more

Simply log on to Zacks.com and view the April episode here. And please let us know what you think of these monthly episodes. Email all feedback to mailbag@zacks.com.

The stock market continues to spin its wheels with earnings season in the driver's seat and a trade agreement (hopefully) riding shotgun. The three major indices came off their lows in the session but two of them still declined as we wait for the quarterly reports to start rolling in tomorrow.

What about that third index? Well, the S&P did come all the way back and technically finished in the green, though no one's going to brag about an improvement of 0.11 of a point, or 0%. It sits just outside a new milestone at 2888.32, waiting for some reason to break through 2900 and on to new highs.

Meanwhile, the NASDAQ slipped 0.21% to 7947.36 while the Dow was off 0.05% (or a little more than 14 points) to 26,143.05.

So here we go! The market has experienced holiday-like low volume of late as we wait to see what earnings season has in store. The suspense is nearly over as J.P. Morgan Chase and Wells Fargo are scheduled to lead things off tomorrow with several other big banks going to the plate next week.

The market is preparing for a soft quarter. According to the most recent Earnings Trends from Sheraz Mian, total S&P 500 earnings are expected to slip 4.4% from last year. This would mark the first decline since the second quarter of 2016, and would provide further proof of the market’s recent concern of slowing growth.

The great thing about low expectations, though, is that they are easier to outperform. And with a recession not expected in the near term, it’s possible that the season could be softer than recent quarters but still better than expected. If that’s the case, then the market may finally have found the catalyst to drive stocks to new highs.

And while we’re being optimistic, everything about the trade negotiations with China appear to be moving in the right direction. Treasury Secretary Steven Mnuchin talked about being hopeful just yesterday, which goes along with other encouraging statements from the likes of President Trump, White House economic advisor Larry Kudlow and even China President Xi.

A better-than-expected earnings season and a trade resolution would be a great double feature for this skittish market… and we may not have a long wait for either. 

Today's Portfolio Highlights:

Surprise Trader: It's about to get real busy for this portfolio as earnings season unofficially starts tomorrow with a couple of the big banks. Dave has already hit the ground running with two picks in as many days. On Thursday, he added a 12.5% allocation in Chart Industries (GTLS), a Zacks Rank #2 (Buy) that manufactures highly-engineered equipment servicing end market applications in energy, industry, life science and respiratory healthcare. The company has a positive Earnings ESP of 7.48% for the quarter coming next Thursday before the market opens. See the full write-up for more on GTLS.

Counterstrike: Shares of Domo (DOMO) shot up to $47 from $30 early last month after a strong quarterly report, which included a positive surprise of 24%. However, this operator of a cloud-based platform has pulled back right into Jeremy’s wheelhouse. The stock now has a solid risk/reward and its chart reflects a 61.8% Fibonacci retracement, which the editor just loves to see. Therefore, he added DOMO on Thursday with a 10% allocation. Learn more about this new buy in the full write-up.

Technology Innovators: 5G is here… and it’s only just begun to invade the globe’s cellular mobile communications. Brian Bolan wants to get involved right now, so he added Airgain (AIRG) on Thursday. This Zacks Rank #1 (Strong Buy) is a provider of embedded antenna technologies. The stock has been moving higher and it should continue to do so as 5G sparks tons of future orders. The editor thinks AIRG could easily see $22 or more down the road. He also appreciates the stock’s three consecutive positive surprises… all of which were triple-digit beats. Read a lot more about this new buy in the complete commentary.

All the Best,
Jim Giaquinto

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