Stocks Plunge Over 7% As Oil Concerns Join Coronavirus Fears

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The market had one of its worst sessions since the financial crisis 12 years ago on Monday, as an historical plunge in oil prices teamed up with ongoing concerns of the spreading coronavirus.

Over the weekend, Saudi Arabia decided to cut selling prices for crude in April after Russia broke up an OPEC deal. The move will flood the world with supply, drive down prices and could hurt the otherwise strong U.S. economy.

Financial and energy names were among the hardest hit, but pretty much everything declined on Monday.

That news would have been enough for a sharp selloff at any time, but it was made even worse as the world continues to worry over the spreading coronavirus.

The result was easily the worst single-day points drop in history for the Dow, breaking a record that was set less than two weeks ago. In fact, half of the top 10 worst point drops in history have come this year.

The Dow tumbled 7.8% (or 2013.76 points) in one day to 23,851.02. Meanwhile, the S&P plunged 7.6% to 2746.6 and the NASDAQ was off 7.3% (or 624.94 points) to 7950.68.

The drop was so bad and came so quickly that it triggered an extremely rare “circuit breaker” when the S&P plunged 7%. The market closed for 15 minutes and then reopened. Stocks finished off their lows of the day.

The S&P was actually down more than 7% by the closing bell, but the next circuit breaker wouldn’t occur unless there’s a 13% plunge.

No one knew when this would all be over when it was just the coronavirus. Now add this oil price war and the uncertainty ramps up… and we all know how much the market hates uncertainty.

Because of these blind spots, the editors did a lot of selling today to cut any losses and take profits where available.

They’re not calling for dip buying just yet, but they are creating watch lists. Once we’re through the worst of this, they’ll spring into action.

Until then, they stress discipline and patience, though that’s easier said than done.

Today's Portfolio Highlights:

Counterstrike: This portfolio isn’t in the mood to buy after “one of the bloodiest mornings we will see in our lifetime”. However, Jeremy did short-cover half of Rogers Corporation (ROG) for a 19.1% return in less than a week. The editor added this engineered materials and components company last Thursday. The profit helps take some of the bite out of hitting stops at HealthEquity (HQY) and JPMorgan (NYSE:JPM).

TAZR Trader: Nobody knows how far this pullback will go, but Kevin has a few scenarios in mind for how the recession fears will play out. Right now, he will play the bounces and let panic work for him, because there will be moments of vicious snapbacks regardless of when the bottom is. On Monday, while seemingly everyone else was selling, the editor bought QQQ 3X Bull (TQQQ) and added to the existing position in T-Bond 2X Bear (TBT). Read the full write-up for more on today’s moves and for updates on Kevin’s plan during this rough time.

Insider Trader: With the market continuing to drop sharply, Tracey decided to sell the rest of Enphase (ENPH) today. The editor pulled big profits from this position several times this year, and this was no exception. She sold the global energy technology company on Monday for a 125.5% return. The portfolio also cut Home Depot (NYSE:HD) and salesforce.com (CRM) to contain any further losses.

Marijuana Innovators: The portfolio added Hexo Corp. (HEXO) on Monday, which is a consumer-packaged goods cannabis company. It is scheduled to report quarterly earnings later this week. Learn all about this new addition in Dave’s complete commentary.

Zacks Short List: This portfolio was made for days like this. It had all five of the top performers on Monday, as this service thrives in falling and volatile markets. The best result was from the short position in Occidental Petroleum (NYSE:OXY), which brought a gain of more than 53% due to the plunge in oil prices. Other double-digit performances came for the short positions in Gardner Denver (IR, +16.1%), iRobot (IRBT, +14.9%), Tesla (NASDAQ:TSLA, +13.6%) and Wynn Resorts (NASDAQ:WYNN, +12.9%).

Black Box Trader: Most of the portfolio was replaced in this week’s adjustment. The seven stocks that were sold included:

• Legg Mason (LM)
• Ralph Lauren (NYSE:RL)
• Genpact Ltd. (G)
• IBM (NYSE:IBM)
• Mattel (NASDAQ:MAT)
• KB Home (KBH)
• Adient (ADNT)

The fresh buys that filled these spots are:

• Booz Allen Hamilton (BAH)
• Collegium Pharmaceutical (COLL)
• FGL Holdings (FG)
• McKesson (NYSE:MCK)
• Patterson Cos. (PDCO)
• PennyMac Financial (PFSI)
• TEGNA (TGNA)

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.

All the Best,
Jim Giaquinto

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