Second Quarter Begins with a 4% Plunge

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There was no fresh start for the market on Wednesday, as each of the major indices began a new month and a new quarter with selloffs of more than 4%.

We’ve been feeling a tiny bit better about the coronavirus situation of late, following huge monetary and fiscal measures along with encouraging medical developments.

As a result, we’re coming off one of the best weekly performances in history, while yesterday’s pullback was tolerated for being much less severe than recent moves lower.

However, comments from President Trump after the bell on Tuesday served as a bit of a wake-up call. He said that the next couple of weeks could be “very painful” and that the number of American deaths from the coronavirus could eclipse 100,000… or even 200,000.

Such models do not inspire confidence that this economic shutdown will be ending soon. Therefore, stocks saw their third pullback in four days… and this one was the worst.

Each of the major indices plunged by approximately 4.4% on Wednesday. The Dow was down 973 points to 20,943.51 and the NASDAQ dipped around 339 points to 7360.58. The S&P slipped 114 points to 2470.50.

Despite the recent bounce back, the indices are coming off horrible quarterly and monthly performances.

And now the virus will start to impact the data. The ISM manufacturing index slipped to 49.1 in March, which suggests contraction (anything under 50). The previous month was at 50.1.

And ADP (NASDAQ:ADP) said US companies cut 27,000 jobs last month, but that doesn’t take the full impact of this shuttered economy into account.

Friday’s government employment situation report is expected to be pretty tough to take. You probably remember that jobless claims soared to an all-time record of nearly 3.3 million in last week’s report.

April is shaping up to be a pivotal month in the fight against the coronavirus. There’s nothing we can do to halt the spread that we aren’t already doing through social distancing. However, investors can start to prepare for the eventual recovery.

Today's Portfolio Highlights:

Home Run Investor: These three selloffs in the past four days really don’t bother Brian. Whether we move higher or lower from here, this range will prove to be a good entry point for investors because eventually the coronavirus will be defeated and the market will move upward. Therefore, the editor plans to add names that will be winners in the post-Covid world. One of those stocks is Fiverr International (FVRR), which provides an online marketplace for selling goods and services. It’s a play on rising unemployment, since Brian thinks a lot of people will look to a site like FVRR to find work. This is a newer company, but it has easily beaten earnings estimates in the past three quarters with an average positive surprise of 49%. And it could be profitable in the next two years or so. Make sure to read the complete commentary for more on this new addition.

Zacks Short List: If the market plunged more than 4% (like it did today), you can bet that this portfolio had a pretty good performance. In fact, it secured the top three spots of the session among all ZU names. The strong results came from Bright Horizons Family Solutions (BFAM, +8.8%), Ceridian HCM Holding (CDAY, +8.1%) and Tesla (NASDAQ:TSLA, +8.1%). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Surprise Trader: “A gap and go, in the wrong direction, for stocks on Hump Day. Equities were buried overnight and pinned to the mat during today’s session. A morning rally was tepid at best with the S&P 500 inching north of 2,500 before stalling out mid-day. From there, swift brutality took markets down more than 4%.

“Negative coronavirus headlines, of course, were the culprit. Once Chinese news bit about the Hunan province being put on partial shutdown again due to another outbreak of coronavirus helped turn the tide in the negative direction.

“The after-hours session is showing a slight bid. Too soon to tell if that is sure to extend to tomorrow. At the very least, I’m expecting some short-covering in oil stocks as President Trump has committed to meetings with top brass in the biz.” – Dave Bartosiak

Until Tomorrow,
Jim Giaquinto

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