S&P Retakes 3,000 as Trade Talks Set to Resume

News from the trade front elbowed its way through the focus on earnings and rates today to give the major indices a strong Tuesday performance.

Trade negotiators from the U.S. and China will meet in the latter country on Monday for their first in-person talks since the G-20 late last month.

The market’s interest this week is mostly with earnings season and the Fed’s rate decision next week, but it’ll always welcome some good news on trade. We still want some resolution on this issue, even if an agreement is still months away.

The indices moved sharply higher after the news, sending the S&P back above 3,000 with a rise of 0.68% to 3005.47.

The Dow is within 10 points of its all-time high after a rise of 0.65% (or about 177 points) to 27,349.19, while the NASDAQ improved 0.58% (or around 47 points) to 8251.4.

It should be noted, though, that the indices were higher even before the trade news thanks to what’s shaping up to be a pretty good earnings season.

Though its still early, most companies have beaten expectations so far and the U.S. consumer remains strong.

One of the major reports of the day came before the bell when Coca-Cola beat earnings expectations and raised its revenue outlook, leading to a more than 6% surge in the session. There was also a solid report from United Technologies before the bell and several good results after the close.

And don’t forget that we’ll be getting some big FAANG reports in the next few days, including Facebook (tomorrow), Amazon and Alphabet (both on Thursday). All of these reports come after the market close.

While we all want to hear what they say, it’ll be interesting to see how they perform the rest of this week after news that the Department of Justice is taking a broad look at big tech for possible antitrust violations. As of this writing, those stocks are down in afterhours. 

Today's Portfolio Highlights:

Surprise Trader: In the wake of a few very good reports for the portfolio this morning, Dave wants to keep this train moving by adding a 12.5% allocation in Glatfelter (GLT). This paper company is a Zacks Rank #1 (Strong Buy) that reports before the bell next Tuesday, July 30th. Earnings estimates for this year and next are on the rise heading into the quarterly report, which is considered a bullish sign. The editor is making room for GLT by selling United Airlines (UAL) for a 6.1% return in just one week. Read the full write-up for more on today’s moves.

Marijuana Innovators: The marijuana industry will be making so much money in the near future that they’re going to need some armored trucks. Therefore, Dave added The Brinks Company (BCO) on Tuesday. It already provides services to marijuana businesses in Canada, but is steering clear of the U.S. for now as our laws on this issue remain cloudy. The company believes that US marijuana-related transport services could represent $250 million in additional revenue annually. For now though, Brinks is a solid and stable performer even without marijuana revenue in the U.S. The editor believes a good quarterly report is coming tomorrow. Read the complete commentary for more on BCO… and learn why the SAFE Banking Act may help the stock enter the U.S. marijuana market. 

Stocks Under $10: It’s time for a little fine tuning in the portfolio now that it's fully invested. Therefore, Brian sold the underperforming Earthstone Energy (ESTE) on Tuesday and immediately replaced it with Photronics (PLAB). This Zacks Rank #2 (Buy) is a leading manufacturer of photomasks and it has a great history of topping the Zacks Consensus Estimate, amassing an average beat of 41% over the past four quarters. We’re still about a month away from its next report. But the editor really likes its chart, which is showing the positive momentum upward that he wants to see right now. Read the complete commentary for more.

Zacks Short List: We had four changes to the portfolio in this week’s adjustment. The short-covered stocks that left the portfolio today included:

• SAP SE (SAP, +9.2%)
• Yandex N.V. (YNDX, +2%)
• China Lodging Group (HTHT)
• Live Nation Entertainment (LYV)

The new buys that replaced these names are:

• 3M Company (MMM)
• Boeing (BA)
• Western Digital (WDC)
• World Wrestling Entertainment (WWE)

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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