Market's Newfound Optimism Brings Another 1% Gain

The January episode of the Zacks Ultimate Strategy Session is now available for viewing! Tune in to this “must-see” event when Kevin Matras, Tracey Ryniec, Ryan McQueeney and Kevin Cook discuss the investment landscape from several angles. Don’t miss your chance to hear:

• Tracey and Ryan Agree to Disagree whether Apple (NASDAQ:AAPL) is “doomed” going forward given the decline in iPhone sales and lack of visionary leadership
• Kevin M. answers your questions in Zacks Mailbag
• Kevin C. and Ryan choose one portfolio to give feedback for improvement
• And much more

Simply log on to Zacks.com and view the January episode here. And please let us know what you think of this format. Email all feedback to mailbag@zacks.com.


You know the market is in a better place these days because it continues to move higher despite any real progress in the trade talks between the U.S. and China.

During the worst of the correction when sentiment on the street was really poor, stocks required more than just happy thoughts to stay in the green. But Friday’s strong jobs report and the “patient” Fed changed the market’s mood, so now a “Talks with China are going very well!” Tweet from President Trump can actually help keep the major indices in the green.

The Dow added another 1.09% (or about 256 points) on Tuesday to finish at 23,787.45, while the NASDAQ increased 1.08% to 6897. The S&P advanced 0.97% to 2574.41.

It was a strong session for tech as Apple continues to recover from its selloff last week after warning about Q1 guidance. The iPhone maker was up 1.91% on Tuesday, but the best FAANG performance was the 3.25% advance for Facebook (NASDAQ:FB). All of these tech giants finished easily on the plus side as investors look to be regaining interest in these former market leaders.

Even if the market is in a good mood, we’re eventually going to need some real progress on the trade front to keep this momentum going. “Sources” in news reports and Tweets from the President are great, but they can’t hold a candle to an actual deal between the two countries that could clear up a major uncertainty for investors moving forward.

But for now, let’s just enjoy the market’s good vibes and hope it can continue...

Today's Portfolio Highlights:

Stocks Under $10: Amid another day in the green for stocks, Brian Bolan continued his plan of going after crowded short trades. On Tuesday, he picked up USA Technologies (USAT), a Zacks Rank #2 (Buy) that still has a short interest position of 11%. Shorts have been covering of late, but the editor believes there’s still more to come. He wouldn’t be surprised to see this stock return to its mid-October level of $6.50 rather soon. Today it climbed more than 12.5% to $4.80! Read the complete commentary for a lot more on this new addition.

Healthcare Innovators: In an environment where growth is suspect and risk is being “severely” re-priced, Kevin thinks it’s best to take fat gains that come quickly. On Tuesday, the editor sold CRISPR Therapeutics (CRSP) and SPDR S&P Biotech ETF (NYSE:XBI) even though these names have only been in the portfolio for a couple of weeks. The bottom line is that the 32% profit for CRSP and the 22% return for XBI are just too tempting not to take at such an uncertain time. Kevin still likes these positions and believes there will be opportunities to buy them again in the first quarter.

Large-Cap Trader: Some of the best opportunities on the Zacks Rank #1 (Strong Buy) List right now are from the telecom space, according to John Blank. Therefore, the editor put some money to work on Tuesday by picking up Telefonica (MC:TEF) Brasil SA (VIV) and Ubiquiti Networks (UBNT) with 4% allocations each. VIV is obviously a Brazilian company. Stocks in that country are up +22% since mid-September. Meanwhile, UBNT is benefiting from a 5G rollout in the good ol' USA. Both companies report again in February. Read the complete commentary for more specifics on these new buys.

Zacks Short List: The portfolio cashed in a double-digit winner this week as it short-covered the following names:

• GrubHub (GRUB, +13%)
• Baidu (BIDU, +9.9%)
• Live Nation Entertainment (LYV, +2.8%)
• Thomson Reuters Corp. (TRI)
• Agnico Eagle Mines Ltd. (AEM)

The new buys that replaced these positions are:

• Newmont Mining Corp. (NYSE:NEM)
• Teradata Corp. (NYSE:TDC)
• Weibo Corp. (WB)
• Schlumberger Ltd. (NYSE:SLB)
• Hess Corp. (NYSE:HES)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Options Trader: "Growing optimism over trade talks with China continues to fuel this market. And it should, The recent correction was in large part due to the escalating tariffs and the uncertainty over what would happen if a full-on trade war developed.

"Traders priced in the worst and stocks tumbled, even as the economy surged. It was clear then that the pullback was overdone. And it’s even clearer now that was the case.

"With the narrative on both sides sounding constructive and hopeful, even expectant, that a deal will be forthcoming by February 28th (if not sooner), it’s no wonder investors have been racing back into the market.

"And once a deal finally is done, the very thing weighing on stocks will be lifted and stocks are expected to soar." -- Kevin Matras

Have a Great Evening,
Jim Giaquinto

Recommendations from Zacks' Private Portfolios:

Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>


Zacks Investment Research