The market just completed its second straight month of gains as it continues to dig out from the coronavirus selloff amid a slowly-reopening economy.
The NASDAQ jumped by 6.8% in May, while the S&P (NYSE:SPY) rose 4.5% and the Dow climbed 4.3%.
Those results add onto double-digit advances for each of the indices in April, which was bouncing back confidently from horrible months in the February and March.
This month’s success breaks down into two important factors: 1) encouraging data on vaccines and 2) the re-opening economy. Investors focused on these things during May, instead of the terrible economic data that included an unbelievable surge in un employment.
Over the past few days, though, the issue of China has returned to the forefront of the market’s mind. In fact, it was the big story today, as stocks spent most of the session in the red awaiting President Trump’s news conference.
The U.S. has been pretty angry with China in regards to the coronavirus for a while, but its recent security law for Hong Kong has really stoked tensions between the two countries.
POTUS had some tough things to say, including revoking preferential treatment for Hong Kong since the country can no longer be considered autonomous according to the State Department.
However, he didn’t impose any new tariffs, nor pull out of the ‘Phase 1’ deal that was such a big part of the market back in the day.
Investors were relieved and moved stocks sharply higher late in the session.
The NASDAQ was back to leading the market on Friday by soaring 1.29% (or nearly 121 points) to 9489.87. For the week, though, it had the smallest gain as stocks flowed out of tech and into more beaten down names.
The index still advanced 1.8% this week.
The S&P rose 0.48% to 3044.31, while the Dow declined 0.07% (or about 17 points) to 25,383.11.
However, the Dow recovered from a more than 300-point plunge and had the best weekly performance of 3.8%, thanks to the previously-mentioned rotation. The S&P was up 3% in this shortened week.
Let’s keep it going in June! The market still has a lot of ground to recover, while the country is just starting to re-open.
Today's Portfolio Highlights:
Surprise Trader: For the past 12 quarters, truck & diesel engine company Navistar (NYSE:NAV) has been rolling over the Zacks Consensus Estimate. And it looks set to beat once again when it goes to the plate on Thursday, June 4 before bell. The stock has an Earnings ESP of 10.7% for that quarterly report. Dave added NAV on Friday with a 12.5% allocation. The editor also sold Apollo Investment (AINV) for a nice 15.3% return in less than 2 weeks. Read the complete commentary for more.
Insider Trader: There are some “intriguing” insider buys at play right now, so Tracey ended the week with two new additions. But first, the editor sold The Mosaic Company (NYSE:MOS) for a 14.8% return in about two-and-half months, while also getting out of the underperforming Upwork (NASDAQ:UPWK) position.
One of the new buys is Royal Caribbean (NYSE:RCL), which has plunged 61% year to date. However, analysts see a big rebound into 2021 now that we’re beginning to re-open. On May 26, a director made a big purchase of 20,000 shares for more than $972,000. The other buy is Tutor Perini (NYSE:TPC), a civil, building and specialty construction company that recently saw a ‘cluster buy’ with 4 insiders. The Executive VP & CFO and three directors all bought this month as the stock rebounded after plunging ‘to oblivion’ in March. It’s still down 21% this year, but is ‘dirt cheap’ and a Zacks Rank #1 (Strong Buy). Read the full write-up for more.
Commodity Innovators: Gold has been so strong that Jeremy isn't sure he'll see a pullback anytime soon. However, the editor knows other ways to invest in the precious metal. On Friday, he added SPDR Gold Shares (NYSE:GLD) and VelocityShares 3X Long Gold ETN (UGLD). GLD is ‘the best way to get exposure to gold’ as the ETF moves with the gold futures contract. The editor considers this as a longer-term holding. UGLD will go up or down the daily move of gold by 3X and would be a shorter-term holding. Read the full write-up for much more on these moves, including a look at their charts.
Blockchain Innovators: Shares of IT consulting firm Virtusa (NASDAQ:VRTU) are down considerably from its highs, but this company is a Zacks Rank #2 (Buy) with expected earnings growth of more than 31% for next year. VRTU’s blockchain solutions focus on six main areas: digital identity; regulatory & legal constructs; security & privacy; scalability; proof of work vs. proof of stake; and exception processing. Dave added the stock on Friday, while also selling the idled CME Group (NASDAQ:CME) for a return of 8.7%. The full write-up has more on today’s moves.
Home Run Investor: Shares of Zscaler (NASDAQ:ZS) soared 29.4% on Friday after the cloud security company reported robust fiscal third-quarter results. ZS continued its impressive streak of triple-digit earnings surprises by beating the Zacks Consensus Estimate by 250%. The four-quarter average surprise is now 312.5%. Revenue of $110.5 million also topped our expectations. ZS was easily the best-performing position of the day among all ZU names.
Have a Great Weekend!
Jim Giaquinto
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