Stocks Move Lower but Stay Calm After Dreary Jobs Report

Rising coronavirus cases and joblessness made for a rough Friday session, but the weekly losses for stocks were less severe than we’ve seen in the recent past.

The Dow dipped 2.7% this week, while the S&P shed 2.1% and the NASDAQ dipped 1.7%.

That’s a far cry from the surge last week brought on by the $2 trillion relief bill, but its also a much better reaction than the double-digit plunges for the Dow in the previous two weeks.

Each of the major indices came into Friday’s session down by less than 1% through Thursday, but we knew the odds of a final day rally were low with the government employment situation report expected to be rough.

Well, it ended up being even worse than expected, with 701,000 jobs lost in March (mostly from leisure/hospitality) and the unemployment rate rising to 4.4% from 3.5%.

These numbers don’t even take into account the full impact of the shutdown. Jobless claims had jumped to approximately 10 million over the past two weeks… and more dismal numbers are expected in the days ahead while we wait to “flatten the curve”.

However, the major indices started the session in the green since we all knew these numbers would be bad. But that resiliency didn’t last long.

The Dow dipped 1.69% (or about 360 points) to 21,052.53 and the NASDAQ slipped 1.53% (or around 114 points) to 7373.08. The S&P dropped 1.51% to 2488.65. Each of the indices did come off their lows.

How about some good news? Oil jumped nearly 15% today after soaring over 20% yesterday. President Trump has been in contact with Russia and Saudi Arabia regarding their disagreements with hopes that some progress can be made in a meeting on Monday.

POTUS was also talking with big oil CEOs today.

It looks like the market has calmed down a bit from the utter shock of this coronavirus shutdown. We know the data is going to be bad like the jobs numbers this week, but stocks have kept it together for the most part and steered clear of the 2000-point plunges and circuit breakers that we saw last month.

Of course, the big question is the same today as it was a month ago: how much longer will this last?

Today's Portfolio Highlights:

Stocks Under $10: Construction names have cooled off recently, and now Brian feels its time to get involved at a better entry point. He picked up Cornerstone Building Brands (CNR) on Friday, a Zacks Rank #1 (Strong Buy) manufacturer of exterior building products like windows, vinyl siding, metal accessories, etc. The company’s last two quarters saw solid positive earnings surprises, bringing the average beat of the past four quarters to 52%. Full-year earnings estimates are ticking higher and it has a great valuation. Plus, CNR should be a big beneficiary of any infrastructure stimulus package. Read the complete commentary for more on this new buy.

Insider Trader: Taking gains and/or containing losses is key in this crazy environment of pandemics and shutdowns. So Tracey is keeping a “short leash” on the whole portfolio, which led to four sells (and three profits!) on Friday. The editor sold United Rentals (URI, +26.2%), Aimmune Therapeutics (AIMT, +14%), Cloudera (CLDR, +5.8%) and Newell Brands (NWL).

She also added today by picking up Jernigan (JCAP), a self-storage REIT that saw three insiders buy shortly after its recent business update on March 26. This passes Tracey’s criteria of buying stocks with insider activity that reflects the situation NOW and not a few weeks ago. Self-storage facilities remain open and operating during this crisis and some are even seeing “booming business” as college kids look to store their stuff as they leave campus to take classes remotely from home. Still, shares of JCAP are down 47% year to date, so the insiders see an attractive entry point. So does Tracey, who bought the stock on Friday with a 10% allocation. Read the complete commentary for a lot more on this new addition, including its recent liquidity and business updates.

Home Run Investor: Some of the more positive news out there right now is all the progress being made on finding a cure and/or treatments to fight the coronavirus. That’s the idea behind Brian adding Novavax (NVAX) on Friday. This specialty biopharmaceutical company already has a skillset with the normal flu, having a couple candidates in its pipeline. But the editor isn’t adding NVAX because he thinks it will find the cure for the coronavirus. Instead, this is one of the companies that will be able to mass produce it when its found… because the country (and the world) will need a ton of it fast! The editor likes this potential and the company’s pipeline, which is more important than earnings for a biotech. He also thinks this Zacks Rank #3 (Hold) will be bumped higher shortly. Read the full write-up for more.

Value Investor: Since there’s no way to time the bottom, Tracey is taking it slow and looking for companies with strong balance sheets and with businesses that can perform well in these difficult circumstances. She added two new positions on Friday, including Internet services company J2 Global (JCOM). The company was added because it has built up a lot of cash that it can use to make it through this crisis. Plus, it has a few divisions that should do well in this economy, including Cloud Services, Gaming and Digital Media. Shares are down 28.7% year-to-date.

The other buy today is a bit of a different idea. Eli Lilly (NYSE:LLY) is a pharmaceutical company that’s actually up nearly 6% year to date with earnings expected to rise 12% in 2020. Furthermore, its not cheap and is not a coronavirus play since it isn’t working on a vaccine. So what gives? Basically, Tracey is buying into strength with LLY and thinks it’s a good place to “hide out”. Plus, it’s got a good balance sheet and is a Zacks Rank #1 (Strong Buy). Read the full write-up for more on these new buys, including their value characteristics.

Have a Great Weekend!
Jim Giaquinto

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