New Week Starts with New Selloff

After two strong weeks in a row, the market starts this one in a deep hole after a broad selloff on Monday.

The NASDAQ had the worst session with a plunge of 2.78% (or about 206 points) to 7200.87. Tech has been getting beaten up since the correction began in early October, but today’s main culprit was Apple. The iPhone maker slipped more than 5% on news that one of its suppliers cut its earnings and revenue outlook due to a reduced shipment request from one of its largest customers. That customer, which was not directly named, is rumored to be Apple.

The Dow dropped 2.32% (or more than 600 points) on Monday to 25,387.18, while the S&P slipped 1.97% to 2726.22. In addition to the ongoing tech wreck, the market is also dealing with the longest losing streak for oil in history (11 straight days) and news reports that President Trump may be preparing new tariffs on auto makers.

Stocks accelerated their losses in the final hour of trading and closed right around its low of the session. While last week as a whole was positive for the major indices thanks to a sharp rally on Wednesday after the midterm elections, stocks have now lost ground in the past three sessions and pretty much wiped out that advance.

The editors entered the weekend wondering if the correction was really over. Could it continue to move higher after the midterm elections went as planned? Or would it have to test those recent correction lows before really getting back on track? Today’s sharp drop increases the odds of that latter scenario. The good news is that would likely end up being the healthiest outcome for the market longer term. As Kevin Matras says: “This is how bottoms are made”.

Today's Portfolio Highlights:

Blockchain Innovators: Even the big guys are getting into blockchain technology, and today’s market pullback has allowed the portfolio to add two of them at discount prices. On Monday, Dave added retailing giant Walmart (WMT) and banking giant JP Morgan Chase (JPM). WMT is using blockchain to help speed up its logistics process. And even though JPM CEO Jamie Dimon has been critical of bitcoin and other cryptocurriences, his company is still using blockchain to adapt and create new systems for clearing and payment processing. Read the full write-up for more on these new buys.

Insider Trader: The banks are once again in a pretty weak spot. When this happened back in 2016, Tracey picked up Keycorp (KEY) and cashed it in several months later for a more than 60% winner. Well, guess what? Insiders at the company are buying again. The CEO and CFO both picked up shares earlier this month. The editor is hoping KEY could be a strong performer once again for the portfolio, so she added it on Monday with a 10% allocation. Meanwhile, with the bears taking the upper hand to begin this week, Tracey decided to cash in a couple winners by selling EW Scripps (SSP) and Bausch (BHC) for profits of 6.4% and 5.3%, respectively. See the complete commentary for a more on these moves.

Black Box Trader: All three of the stocks that were sold this morning logged profits for the portfolio. Those sells were:

• Booz Allen Hamilton (BAH, +6.8%)
• HCA Healthcare (HCA, +6%)
• Sprouts Farmers Market (SFM, +3.8%)

The new buys that replaced these names are:

• Target (TGT)
• Molina Healthcare (MOH)
• CDW Corp. (CDW)

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

Zacks Confidential: The midterm elections played out just as the market wanted. It wasn’t so much who won and who lost, but that there were no surprises. The market was expecting a split Congress… and that’s exactly what it got. So which areas are most likely to prosper in the gridlock that we’re likely to see? Kevin has asked our Director of ETF Research Neena Mishra to explain what the landscape looks like now that this big piece of uncertainty has been clarified. Read her detailed commentary and learn about a couple of funds that will benefit: Best ETF Strategies for Post-Election Gridlock.

All the Best,
Jim Giaquinto

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