A Groggy Start To Earnings Season

Stocks pulled back a bit on this first day of earnings season, but the major indices came well off their morning lows as the market remains stable so far in 2019.

Citigroup lead off the season with better-than-expected earnings, though revenues came in below estimates. The stock was still up nearly 4% on Monday, sparking a solid session for the beaten down banks.

Several of the industry’s big guys that are reporting this week saw gains of more than 1% today, including JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) (both reporting tomorrow), Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) (both reporting Wednesday) and Morgan Stanley (NYSE:MS) (reporting Thursday).

However, it was still a negative session for the market as a whole. Investors feel a bit more nervous this time around since earnings growth is expected to be down from the previous three quarters of the fiscal year. Plus, we’re still worried about slowing global growth and the lack of resolutions for the trade conflict with China or the government shutdown (which is now the longest in history).

It was an especially rough day for tech, as the NASDAQ slipped 0.94% to 6905.92. Except for Facebook (NASDAQ:FB), the FAANGs were all off by more than 1%. Netflix (NASDAQ:NFLX) dipped about 1.4% a couple of days before its own earnings release on Thursday.

The S&P declined 0.53% to 2582.61, while the Dow was off 0.36% (or about 86 points) to 23909.84. The latter index had lost well into the triple digits at the worst point of the session.

Stocks are coming off of a solid week of gains; their third straight week in the green stretching back to that Dec 26th rally. It’s a great relief to see investors again buying into weakness, because that was something we rarely saw during the correction. A good earnings season would go a long way in keeping the market's sentiment high as we wait for clarity on all of the other uncertainties.

Today's Portfolio Highlights:

Stocks Under $10: Now that the market is looking better, Brian Bolan wants to eventually get the portfolio back up to 15 names. Therefore, he added Lattice Semiconductor (LSCC) on Monday, which is a day before his usual weekly update. The company has put together back-to-back quarters with positive surprises and has an average beat of nearly 11% over the past four. LSCC enjoyed a nice up channel before the correction reared its ugly head in October 2018, and then the stock moved lower along with its industry and the market. Brian believes this Zacks Rank #2 (Buy) is set to get back on track. Read the complete commentary for more on this new buy and don’t be surprised if the portfolio picks up another position tomorrow.

Black Box Trader: This week's adjustment included four changes. The stocks that were sold today include:

• HD Supply Holdings (HDS, +6.2%)
• MDU Resources Group (MDU)
• T-Mobile US (TMUS)
• United Continental Holdings (UAL)

The new buys that replaced those names are:

• CenterPoint Energy (NYSE:CNP)
• Hertz Global Holdings (HTZ)
• Molina Healthcare (MOH)
• Santander (MC:SAN) Consumer USA Holdings (SC)

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: If you know where we are in the business cycle, then you can better control your emotions and take advantage of opportunities when everyone else is panicking. John Blank knows all about these cycles, which is why Kevin handed him the keys to this week's Zacks Confidential. Read his detailed article by clicking: How to Play Business Cycles.

Options Trader: "As I’ve mentioned before, earnings season historically is a great time for stocks. In fact, over the last 9 ¾ years of this bull market, there have been 39 earnings seasons, and 28 of them (72%) have been up. So it looks like the gains are set to continue.

"And we all know how stocks can soar if they positively surprise. It’s not uncommon to see stocks surge 10%, 15%, or even 20% or more in one day on a fantastic report.

"With stocks still trading at deep discounts from where they were just a few short months ago, and even years ago, we could see some explosive gains this earnings season." -- Kevin Matras

All the Best,
Jim Giaquinto