This week had a little something for everyone, including solid earnings reports, a dovish Fed, happy trade talk and now strong economic data. While the major indices came off their highs by the closing bell, Friday was still a strong enough session for the Dow and NASDAQ to extend their winning streaks to an impressive six weeks.
The Dow climbed nearly 200 points at its best today and dipped into the red at its worst. It settled with a gain of 0.26% (or about 64 points) to 25,063.89. That was good enough for a weekly improvement of 1.3%. The S&P rose 0.09% to 2706.53 for a five-day advance of 1.6%.
However, the NASDAQ couldn’t stay on the plus side and finished lower by 0.25% to 7263.87. The index was dragged down a bit by Amazon (NASDAQ:AMZN), which slipped nearly 5.4% in the session. The retailing giant beat on both the top and bottom lines in its report after the bell yesterday, but its guidance wasn’t as strong as the market hoped. Nevertheless, the index still finished the week 1.4% higher.
The major indices had a much better week than last when the Dow and NASDAQ managed to barely keep their winning runs alive with gains of only about 0.1%, while the S&P, of course, was slightly negative.
The economy added 304,000 jobs in January, which crushed expectations for only about 170,000. The December result was revised sharply lower and wage growth was a bit on the soft side. Nevertheless, the market loved the number, especially at a time when the Fed has been talking about being patient with their rate hikes.
It’s been a great week for the market, especially when you consider that it began with a couple lackluster sessions. Now we just need all this backslapping between the U.S. and China to result in an actual trade deal.
Today's Portfolio Highlights:
Surprise Trader: For his fifth buy in as many days, Dave picked up American Superconductor (AMSC). Its an energy technology company that makes products and solutions for electrical grids. The stock has beaten the Zacks Consensus Estimate for 12 straight quarters, amassing an average surprise of 38.4% over the past four. And now it has a positive Earnings ESP of 6.06% for its upcoming quarter, which hasn’t been announced yet but should be coming very soon (maybe next week). The editor added AMSC on Friday with a 12.5% allocation. See the full write-up for more on this new addition.
Options Trader: Having just gotten over a polar vortex here in the Midwest, it seems fitting to add a global leader in the heating, air conditioning and refrigeration markets. Lennox International (LII) is a Zacks Rank #2 (Buy) that is expected to grow earnings more than 14% in the first quarter and nearly 19% for the full year. However, its valuation is still affordable. Kevin added a couple bull call spreads in LII by buying to open 2 June 230.00 Calls AND selling to open 2 June 240.00 Calls. If the stock can advance just 4.8% from here to $240 or more, then these spreads will bring a return of 117%. Get more specifics on these moves in the full write-up.
Insider Trader: The portfolio picked up a couple big caps and a riskier play on Friday. Tracey gave each name an allocation of 8%, which leaves plenty of cash left over for the rest of earnings season. The new buys are:
• Discover (DFS): This big cap credit card & financial company reported a disappointing quarter last week, so the CEO stepped to the plate and bought 30,000 shares as a “confidence buy”.
• Delta Airlines (NYSE:DAL): Shares are down more than 10% over the past three months, but that didn’t keep a director from adding over 5000 shares earlier this week. Another director bought in December as well.
• Live Oak Bancshares (LOB): This small-cap bank is the risky play, as shares have plunged of late. Also, the government shutdown led to a cut in 2019 estimates. However, a mini-cluster buy from three insiders this week suggests that the panic has gone too far and the worst is over. Tracey agrees.
Read the complete commentary for more on all these moves.
Stocks Under $10: The ghosts of 2018 continue to haunt Brian Bolan, who plans on taking gains more regularly in 2019. USA Technologies (USAT) was the best-performing stock in the portfolio, but the editor thinks the easy money has been made here as his plan of going after crowded short trades really paid off. He sold USAT on Friday for a 31.7% return in less than a month!
Counterstrike: CyberArk Software (CYBR) is quickly approaching $90 and still has a lot of momentum. But Jeremy has no problem with taking some profit now, so he sold half of this IT security solutions provider for a 24.8% return. The editor will let the rest ride as it approaches his price target of $97.
Technology Innovators: Twilio (TWLO) closed on its acquisition of SendGrid today. Sometimes an acquisition like this can cause the buyer a bit of indigestion, while other times it’s absorbed quite easily. Brian Bolan doesn’t know which will be the case for TWLO, so he decided to sell the stock today because he plans to ring the register a lot more often in 2019. TWLO brought a return of 18.3% in less than two months. He also took a gain of 2.5% in Citrix Systems (NASDAQ:CTXS).
Have a Great Weekend!
Jim Giaquinto
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