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Relief Rally Snaps the Dow's 5-Day Losing Skid

Jim Giaquinto

The market regained its composure on Tuesday and got back a good chunk of yesterday’s coronavirus selloff.

The sickness has yet to be contained (with China reporting more than 4500 infected and over 100 deaths), but stocks kept their cool and refocused on a busy week of earnings season.

More specifically, we’ll be seeing a lot of major tech names going to the plate in the coming days, including three of the FAANGs and Microsoft.

Therefore, the NASDAQ led the way higher with a surge of 1.43% (or approximately 130 points) to 9269.68 as we all waited for Apple’s report after the bell. This index had the biggest plunge yesterday of nearly 2%, so it was appropriate to have the biggest rebound.

The S&P saw its first 1%+ slide in months on Monday, but it got 1.01% of it back today and finished at 3276.24.

The Dow finally broke its 5-session losing streak with an advance of 0.66% (or around 187 points) to 28722.85. The index is positive again for 2020 after moving into the red yesterday.

 

Dozens of companies reported today, but the market was mostly focused on Apple after the bell. Shares jumped 2.8% in anticipation and the iPhone maker didn’t let us down.

The company reported earnings and revenue that easily surpassed expectations, as iPhone revenue advanced 8% and services (which includes the recently launched Apple TV+ streaming service) jumped 17%. It also offered a solid guidance.

As of this writing, shares of Apple are up approximately 2% afterhours.

Furthermore, while it might not have received much attention, investors certainly appreciated that consumer confidence jumped to a five-year high in January amid a couple new trade deals.

Same drill tomorrow. We’ll be getting more reports from big tech companies like Facebook and Microsoft, while also watching the updates on the coronavirus. Let’s hope the indices can get back even more of Monday’s slide…

Today's Portfolio Highlights:

Stocks Under $10: In just a little over two months, Celsius Holdings (CELH) has risen by double digits in the portfolio. But most of that gain came in the last few days. This nutritional foods company has been on quite a run, but Brian reminds us that “those runs cannot last forever”. He decided to sell CELH while he could still bank a 36.9% return.  The underperforming American Superconductor (AMSC) was also sold. The editor replaced one of these positions by adding Celestica (CLS), a Zacks Rank #2 (Buy) printed circuit boards company with “straight A’s” for the Style Scores. The chart looks “super strong”. Learn more about the addition of CLS and all other moves in the full write-up.

Counterstrike: This morning’s relief rally gave Jeremy an opportunity to finally make a new buy and do some tidying up in the portfolio. With the coronavirus still spreading, the editor wanted to add something that wouldn’t be as impacted by bad news. Therefore, he picked up Zacks Rank #1 (Strong Buy) specialty P&C underwriter RLI Corp. (RLI) with a 7% allocation. The company beat earnings by 28% in its recent report, while its chart suggests a breakout could be on the horizon. The portfolio also sold The Boston Beer Company (SAM) and Steelcase (SCS) for gains of 7.6% and 4.5%, respectively. See the complete commentary for more on all of today’s moves.

Surprise Trader: Shares of Cree (CREE) jumped 10% after its earnings surprise last quarter. This Zacks Rank #2 (Buy) from the Semiconductor – Discrete industry will be reporting again after the bell tomorrow and has a positive Earnings ESP of 1.64%. “A smaller-than-expected loss this quarter, or a push into positive territory, would be a solid catalyst for the short-term,” said Dave, who also appreciates that CREE’s space is in the top 4% of the Zacks Industry Rank. He added the stock on Tuesday with a 12.5% allocation. Read the full write-up for more.

Zacks Short List: The portfolio replaced six positions in this week’s adjustment and most of them brought positive returns. The stocks that were short-covered today include:

• Cheniere Energy (LNG, +7.5%)
• Wynn Resorts (WYNN, +5.7%)
• Texas Instruments (TXN, +1%)
• Weyerhaeuser (WY, +0.26%)
• Twitter (TWTR)
• Amazon (AMZN)

The new buys that replaced these names are:

• Baozun (BZUN)
• GDS Holdings (GDS)
• iRobot Corp. (IRBT)
• Live Nation Entertainment (LYV)
• NovoCure Ltd. (NVCR)
• Spirit Aerosystems (SPR)

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

Have a Great Evening,
Jim Giaquinto

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