Stocks Still Angry at the Fed

The market’s still a bit frustrated that we won’t be seeing a rate cut anytime soon.

As a result, stocks took another step backwards on Thursday, though came well off their lows by the closing bell. 

The Dow plunged approximately 250 points at its worst, but cut more than 100 off the deficit by the end. The index was down only 0.46% (or around 122 points) to 26,307.79. 

The S&P slipped 0.21% to 2917.52 after momentarily threatening to move below the 2900 mark. Likewise, the NASDAQ came dangerously close to giving up the 8000 mark, but finished off by only 0.16% to 8036.77. 

The indices began the session in the green. However, it didn’t last long. In addition to the Fed hangover, a sharp drop in crude prices also pressured stocks.  

Now we head into Friday’s session with each of the major indices down for the week. The S&P and NASDAQ entered Monday at new highs, but they had only been inching forward in previous sessions as investors took a “wait and see” attitude toward earnings season. 

Well, the reports have been better than the lowered expectations, which is a great relief for investors. But these past couple of sessions put the market under pressure. Not only did the Fed sound a little more hawkish than before, but we’re also waiting for a couple big events.

The jobs report will be released tomorrow morning. You may remember that the economy added 196,000 jobs last time, which was way better than expectations. But most importantly, the reading marked a return to form after a surprisingly weak number for February. Friday’s report should look a lot more like March with about 190,000 jobs added. If its in that neighborhood, then there shouldn’t be any problems. 

The market’s also waiting for a trade deal with China. Unfortunately, this issue doesn’t have a schedule. We’ve been waiting months for it, and sentiment still seems to be very positive. We keep hearing that its close. But does that mean in the next couple weeks? Or the beginning of June? And what will this deal look like? 

Let’s hope we find out sooner rather than later…  

Today's Portfolio Highlights:

Counterstrike: The charts are telling Jeremy that the S&P could dip all the way to 2860 before heading higher again. The always-cautious editor wants to put on a hedge that holds the possibility of a quick return. Therefore, he added the double-leveraged ProShares Ultra VIX Short-Term Futures ETF (UVXY) on Thursday with an 8% allocation. In other news, Jeremy also sold Guidewire Software (GWRE) after the company reported accounting issues. He has no interest in sticking around with that type of overhang, so he sold the stock and banked a nice 12.2% return in a little over a month. Read the full write-up for more on all of today’s moves.

Surprise Trader: The leisure & recreation services space is in the top 36% of the Zacks Industry Rank as we move toward summer. Dave found a company from this area with a huge Earnings ESP. SeaWorld Entertainment (SEAS) is a Zacks Rank #2 (Buy) that’s due to report on Tuesday, May 7th … and it has an ESP of 16%! EPS growth for this year is expected at more than 136% with the following year growing another 23.4%. The editor added SEAS on Thursday with a 12.5% allocation. See the complete commentary for more on this name.

Blockchain Innovators: Digimarc (DMRC) had already gained more than 100% this year heading into its first-quarter report this morning. The maker of “The Barcode of Everything” beat revenue expectations… and then soared another 45% on Thursday alone! Some of that momentum can also be attributed to a partnership with retail giant Walmart a few days earlier. Needless to say, DMRC was easily the best performing stock of the day among all ZU names. It is also the second-best performer in the portfolio with a gain of more than 48% since its inception on March 1, 2019.

All the Best,
Jim Giaquinto

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