Strong Open Tumbles to Slight Losses in Volatile Session

Back-to-back gains remain elusive in this unpredictable market, as the major indices surrendered a huge morning rally on Tuesday to finish the session slightly negative.

In more typical times, the Dow giving up a more than 900-point gain would be terribly disheartening.

But these times are anything but typical!

Considering that the index soared by more than 1600 points just yesterday, a bit of a pullback is understandable. Stocks obviously got ahead of themselves in the morning, but ended up keeping almost all of Monday’s rally.

The Dow finished lower by 0.12% (or about 26 points) to 22,653.86. It was up approximately 940 points at its best and was still up about 300 points with 10 minutes left.

Despite the volatile end, it held onto almost all of yesterday’s 7.7% surge.

The other indices followed the same course. The NASDAQ dipped 0.33% (or nearly 26 points) to 7887.26 and the S&P declined 0.16% to 2659.41.

Both of these indices gave up huge gains from the morning, but managed to hang onto nearly all of yesterday’s 7%+ rallies.

In addition, when was the last time we saw declines of well under 1%? That seems pretty normal. And not the “new” normal, but the “old” normal from a few months ago before the coronavirus ruined everything.

Speaking of the virus, the market remains hopeful that we’ve turned some kind of corner. While New York saw its biggest single-day rise in deaths on Tuesday, the number of people going to the overworked hospitals declined. And there were encouraging numbers out of some European countries too, including hard-hit Italy.

On Monday, we got our first bit of good medical news about the coronavirus since the outbreak began. Signs that the spread may be in the early stages of peaking led to that epic advance.

But the market obviously wasn’t ready to throw a parade. It will still be a while before the economy opens up again, and nobody knows how quickly things will recover.

All the more reason why Treasury Secretary Steven Mnuchin is looking for $250 billion more to help small businesses and why lawmakers are talking about another relief package.

So it is disappointing that we couldn’t add onto yesterday’s advance, but stocks are still up solidly for the week and will have plenty of opportunities to rally if the good news keeps coming.

Today's Portfolio Highlights:

Income Investor: The portfolio sold iShares Core High Dividend (HDV) on Tuesday and immediately replaced it by adding Schwab U.S. Dividend Equity (SCHD). One of the major reasons Maddy made this move was energy. HDV has tons of exposure to this volatile space, but SCHD cuts that influence by about half. This mid-cap weighted fund selects positions that have been paying dividends for at least a decade. The top sectors are consumer non-cyclicals, technology and industrials. SCHD has one of the lowest fees in its segment, yields almost 4% and has assets under management of $9.62 billion. Read the complete commentary for more on today’s moves.

Stocks Under $10: With the market showing some life recently, Brian is looking to get a little more aggressive. Therefore, he added PharmAthene (ALT) on Tuesday, which is a clinical-stage immunotherapeutics company. The editor notes that this stock is mentioned in several articles as a potential coronavirus play. It gained nearly 13% today. Brian sees this as a shorter-term play. Read the full write-up for a lot more on ALT.

Blockchain Innovators: With so many people forced to work at home these days, it’s a golden opportunity for cloud-based software-as-a-service companies. That’s the reason Dave added eGain (EGAN) on Tuesday. The company provides cloud-based customer engagement solutions, and its AI-reasoning tool is already used by Paylocity. The editor thinks more companies will be looking toward EGAN even after this outbreak, since many people will decide to continue working from home either permanently or partially. In addition to all this, EGAN is a Zacks Rank #2 (Buy) with earnings estimates on the rise in the past three months. Read the full write-up for more.

Insider Trader: A director at Union Pacific (NYSE:UNP) bought shares of his own company on March 31. However, the railroad reports on April 23. So how is that possible when insiders are supposed to be on lockdown that close to the report? The answer is he used a 10b5-1, which has a set date on which they must buy regardless of price. Through this plan, insiders can technically buy or sell during the lockdown period. Shares of UNP are down 18% year to date, but Tracey likes the space. The insider activity and the low price made for great reasons to add the company on Tuesday with a 10% allocation. Read the editor’s complete commentary for a lot more on this new addition. By the way, this portfolio had one of the biggest winners today as Jernigan Capital (JCAP) jumped 10.4%.

Counterstrike: The S&P got pretty close to that 2800 level this morning, which Jeremy has already said is a place where he plans to get neutral and look for shorts. Even though it slipped back a bit later in the session, he cashed in some profit on Tuesday. He sold Micron Technology (NASDAQ:MU) as the stock approaches its 50-day moving average, collecting a gain of 23.7% in three weeks. The editor also sold three-fourths of CME Group (NASDAQ:CME) for a 5.3% return and will let the remaining third run a little longer.

Zacks Short List: The portfolio swapped out half of its positions in this week's adjustment. The following names were short-covered today:

• BioMarin Pharma (BMRN, +9.5%)
• JD.com (JD, +1.8%)
• Vail Resorts (MTN)
• GDS Holdings (GDS)
• Bright Horizons Family Solutions (BFAM)

The new buys that filled these spots are:

• Agnico Eagles Mines (AEM)
• Alteryx (AYX)
• Cracker Barrel Old Country Store (CBRL)
• Live Nation Entertainment (LYV)
• Wynn Resorts (NASDAQ:WYNN)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Until Tomorrow,
Jim Giaquinto

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