All Mixed Up to Start Fed Week

The market didn’t move much on Monday as it prepares for an eventful week that includes several matters of interest to investors.

Of course, the Fed meeting is taking up most of the oxygen in the room. The market expects a rate cut of at least 25 basis points on Wednesday and wouldn’t mind Powell & Friends leaving the possibility open for even more easing later this year.  

But let’s not forget that trade negotiations between the U.S. and China restarted today. Perhaps learning from the past, participants are not going overboard with predictions of success. A deal could still be a far way off (if it comes at all). Hey, we’re not going to have a resolution if we don’t try, right?

As if the Fed and trade weren’t enough, it’ll be another crazy week of earnings. The biggest release will be Apple tomorrow after the bell. This will be the final FAANG name to report. The week ends with the government’s jobs report.

Phew! It’s no wonder the market didn’t feel like doing much today. The rest of this week could be pretty hectic.

Nevertheless, the Dow managed to eke out a gain. It advanced 0.11% (or nearly 29 points) to 27,221.35.

The other major indices came off their lows of the session, but never really considered a move onto the plus side. The NASDAQ dipped 0.44% (or almost 37 points) to 8293.33, while the S&P slipped 0.16% to 3020.97. These indices both entered the session at all-time highs.

Stocks are coming off a solid Friday session that led to positive weekly performances for each of the major indices.

Earnings season has been pretty good so far, which is a great weight of the market’s mind. Hopefully, Apple tomorrow and the Fed on Wednesday can continue this encouraging trend and keep stocks in record territory.

Today's Portfolio Highlights:

Surprise Trader: The portfolio thinks MDC Holdings (MDC) can build a nice profit after its quarterly report. That’s what the company does! It’s part of the Building Products – Home Builders space, which is the Top 14% of the Zacks Industry Rank. It beat by 5 cents last time and has a positive Earnings ESP of 2.68% for the quarter coming before the bell this Wednesday, July 31. Rising earnings estimates have made MDC a Zacks Rank #1 (Strong Buy). Dave sold Controladora Vuela (VLRS) to make room. Read the full write-up for more.

Healthcare Innovators: Since last week’s great earnings pop to new all-time highs for Edwards Lifesciences (EW), Kevin has been reviewing the growth projections for this innovator in TAVR (transcatheter aortic valve replacement). His conclusion today was to take the gain near the new consensus price target of $220. The sale brings the portfolio a return of 23% in a little over three months. And while Kevin is taking the profit now, he’ll be eyeing opportunities to start another position near $200. Read the full write-up for his 4-point rationale to sell EW.

Black Box Trader: The portfolio swapped out four positions in this week’s adjustment. The stocks that were sold today included:

• Lockheed Martin (LMT, +3.2%)
• Dollar General (DG)
• HP Inc. (HPQ)
• Liberty Global Plc (LBTYA)

The new buys that filled these spots were:  

• DaVita (DVA)
• Dick's Sporting Goods (DKS)
• JetBlue Airways (JBLU)
• The Progressive Corp. (PGR)

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

Counterstrike: "The cut of 25 basis points is in the cards and I fully expect that cut to come. The question for traders will be is there another 25 points coming, either tomorrow or in the near future. It’s hard to speculate what the market will do on 0.5% cut, but I think the best outcome would be for the Fed to do as expected and remain somewhat dovish.  

"Whatever happens, the move should be big. I was looking at SPX options today for Wednesday and options way out of the money are very pricey. Anything goes, so ready yourself.

"On top of the Fed, we will see a handful of earnings coming. Perhaps the biggest will be Apple tomorrow afternoon. I fully expect a good quarter, but the stock has run pretty high already. Investors are expecting Apple to impress and any miss will force the market lower ahead of the Fed.  

"I saw a couple stocks I wanted to buy today. These stocks were recent earnings losers that were beaten down on ok reports. I would love to buy later in the week if we see a Fed hiccup. I think patience is warranted for our portfolio." -- Jeremy Mullin

All the Best,
Jim Giaquinto

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