Stocks Jump More Than 1% to Finish Volatile Week

We ended this crazy week with a nice rally on Friday, which didn’t keep the major indices from logging a third straight weekly decline but did significantly trim losses from Wednesday’s recession frenzy.

The NASDAQ jumped 1.67% (or nearly 130 points) today to 7895.99 and also had the smallest weekly loss of around 0.7%.

The S&P improved 1.44% to 2888.68, while the Dow advanced 1.2% (or 306 points) to 25,886.01. These indices were down 1% and 1.5%, respectively, for the week.

Bond yields rebounded on Friday and, therefore, soothed investors’ fears of a looming recession that were brought on from the inversion on Wednesday when the 10-year briefly fell below the 2-year.

Just to put into perspective how seriously the market took that inversion, the Dow has gained 400 points in the past two days but has only recovered half of that mid-week selloff.

Strong retail sales for July and an impressive quarterly report from Walmart on Thursday signaled that the U.S. consumer is nowhere near as concerned about a recession as investors. Undoubtedly, this vote of confidence from two-thirds of the economy also helped calm the market’s nerves.

For the second straight week now, the major indices have enjoyed nice bounces from sharp selloffs to save face by Friday. However, investors don’t want the market to make a habit of this and would prefer getting back to solid weekly gains in the second half of what’s turning out to be a really rough month of August.

Looking toward next week, the Fed takes center stage once again as the annual Jackson Hole Economic Policy Symposium gets underway on Thursday with Chair Jerome Powell speaking on Friday morning.

The market is even less compromising than it was in July; it demands another rate cut next month, especially after the recent recession scare.

Well, now we can head into the weekend with the possibility that Wednesday’s epic pullback was an extreme overreaction. However, the market will remain on pins and needles next week, and susceptible to any headline or presidential tweet.

Let’s hope for some good news and see if we can turn this month around in the back half…

Today's Portfolio Highlights:

Counterstrike: The market’s bounce off yesterday’s lows prompted Jeremy to spring into action with a couple moves on Friday. He added Callaway Golf (ELY) with a 10% allocation after high-frequency traders pulled shares lower despite a strong quarterly report. The golf products staple beat by 48% last week and looks to be a bargain around $17. And for something completely different, the editor also shorted YY Inc. (YY) with an 8% allocation. Who wants to add a Chinese communication social platform when there’s still no trade deal? Plus, this company recently missed the Zacks Consensus Estimate by 18%. Jeremy thinks this Zacks Rank #5 (Strong Sell) is headed lower. Read the complete commentary for more.  

Value Investor: The homebuilders are pretty cheap right now and orders are starting to turn around after a rough end to 2018. Tracey got into the space today because she thinks declining mortgage rates and strong monthly permits suggest that they will continue to get a boost. The editor added M/I Homes (MHO), a small-cap single-family homebuilder that saw sales surge 10% in May and 13% in June. In addition to being inexpensive, earnings for MHO are expected to rise 15.1% this year. This Zacks Rank #1 (Buy) has a great history of beating the Zacks Consensus Estimate, having topped by more than 25% in its most recent report. Get more specifics on MHO in the complete commentary. 

Surprise Trader: The strong U.S. consumer and impressive quarterly performance from Walmart has Dave feeling pretty good about another retailing giant. Target (TGT) is scheduled to report before the bell on Wednesday, August 21st. It beat by 7% last time and has a positive Earnings ESP of 1.04% for the upcoming release. He added TGT on Friday with a 12.5% allocation. The editor also sold Chipotle Mexican Grill (CMG) for a 9.6% return in less than a month. Read the full write-up for more on today’s moves.

TAZR Trader: Shares of Simpson Manufacturing (SSD) are rallying back from $58, but Kevin doesn’t think this building products manufacturer will be able to fill the gap up to $66. In fact, after missing earnings by 14% and watching estimates for this year move lower, the editor thinks this Zacks Rank #5 (Strong Sell) will test recent lows at $58 and maybe even lower. He shorted SSD on Friday with a 5% allocation. Kevin also bought another 5% in Trade Desk (TTD), adding onto the original purchase in early July. The complete commentary has more on today’s moves.

Have a Great Weekend,
Jim Giaquinto

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