Dow Closes Above 26K on 6th Straight Day of Gains

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This was going to be the day when the U.S. imposed a 5% tariff on Mexican imports, but instead it turned out to be a continuation of last week’s epic rally.

Late Friday, President Trump Tweeted that a deal had been struck with our southern neighbors and the threatened tariffs would be suspended.

The news gave the major indices permission to add onto last week’s gains, which just so happened to be the best week of 2019 so far.

Tech rallied again and pushed the NASDAQ out front with a surge of 1.05% (or about 81 points) to 7823.17. The S&P briefly recaptured 2900 on Monday, but settled with a gain of 0.47% to 2886.73.

Remember that the latter index took back 2800 from May’s pullback as recently as last Tuesday. In other words, it moved approximately 1000 points into the green in about a week, which underscores the strong start to June.

The Dow is back above 26,000 and has its longest winning run in more than a year after rising 0.30% (or about 79 points) to 26,062.68.

The rally ran out of considerable steam by the closing bell, perhaps because a resolution with Mexico was expected after a couple days of positive meetings.

Nonetheless, the Dow still has 6 straight days in the green, while the S&P and NASDAQ have 5 consecutive days on the plus side.

The major indices each jumped approximately 4% or more last week. (In fact, the Dow broke its 6-week losing streak by soaring more than 1,100 points, or 4.7%!)  

In addition to trade, the market continues to bask in Friday’s soft jobs report. Investors consider it another reason for the Fed to cut rates later this year, especially after the Fed Chair stated that they would do whatever is “appropriate” to keep the good times going.

And it was also fun and bullish to see a couple of big mergers this Monday. Raytheon and United Technologies agreed to an all-stock merger, while salesforce.com will be acquiring Tableau Software.

We certainly shouldn’t be expecting another performance like last week’s. But some follow-through after the dismal month of May isn’t too much to ask!

Today's Portfolio Highlights:

Blockchain Innovators: The ‘FinTech Lab’ over at Virtusa (VRTU) is getting a lot of help from blockchain these days, according to a recent SEC filing. Dave noticed that this IT consulting & outsourcing services company is using blockchain to help its financial services clients open banking API platforms. But even more exciting moving forward is that VRTU will be using blockchain in its healthcare and insurance interests as well. This Zacks Rank #2 (Buy) has pulled back to the low $40s from nearly $55, making it a bargain for the portfolio. The complete commentary has more on this new addition.

Home Run Investor: The buying spree continued on Monday, as Brian plans to get the portfolio up to 12 names this week. The editor believes that cloud companies will continue to be ‘red hot’ in the wake of salesforce buying Tableau, so he decided to pick up Inovalon Holdings (INOV) on Monday. This healthcare cloud play is a Zacks Rank #2 (Buy) thanks to earnings estimates steadily grinding higher. Valuation is a bit ‘stiff’, but Brian considers it acceptable for a company that’s expected to grow its topline by 56% on a year-over-year basis. The portfolio now has 11 positions and should be able to add #12 on Wednesday. Read more in the full write-up.

Counterstrike: Now that we have a deal with Mexico and an interest rate cut looks very likely, Jeremy feels comfortable enough to add a couple long positions. Hibbett Sports (HIBB) presents a classic counterstrike play, as this operator of sporting goods stores came back to earth after surging 20% on a strong earnings report. Meanwhile, the editor is taking a little bit of chance by adding interactive security solutions company Alarm.com (ALRM), which has slipped below its 200-day despite an earnings beat in its recent report. He believes both of these names are set to run higher, so HIBB and ALRM were added with allocations of 7% and 9%, respectively. Read the full write-up for more, including a look at their charts.

Technology Innovators: As with his other service Home Run Investor, Brian is looking for more exposure to the cloud space after salesforce.com bought Tableau. For this portfolio, he decided to go with BlackLine (BL), which provides cloud-based solutions for finance & accounting that centralize and streamline financial close operations and other key processes for mid- and large-cap companies. The company has an average positive surprise of 233% over the past four quarters. Plus, earnings estimates for this year and next have moved higher in the past 60 days. Read the complete commentary for more on this new pick.

Black Box Trader: Four of the five names that were sold in this week’s adjustment bring gains after just one week in the portfolio. The stocks that left the service today include:

• Flowserve Corp. (FLS, +5.4%)
• Loews Corp. (L, +4%)
• Altice USA (ATUS, +3.2%)
• Hartford Financial Services (HIG, +3%)
• Rent-A-Center (RCII)

The new buys that replaced these names are:

• Cummins (CMI)
• Dollar General (DG)
• Leidos Holdings (LDOS)
• Pilgrim’s Pride (PPC)
• Tractor Supply (TSCO)

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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