Stocks Bounce Late After Another Failed Rally

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If you felt a little queasy after today’s session, you are certainly not alone. We got another head fake on Monday as a solid morning rally disappeared and gave way to the latest selloff. But the last half hour turned sharply higher and dramatically curtailed the plunge. That’s enough to make anyone feel sick!

The NASDAQ saw the sharpest decline as tech continues to suffer after losing its leadership position. The index, which started solidly in the green along with its counterparts, dropped 1.63% (or nearly 117 points) on the day to 7050.29.

The rest of the FANGs will be reporting this week, as Facebook comes tomorrow and Apple is scheduled for Thursday. So far, these once high-flyers haven’t been thrilling the market. Amazon (-6.33%) and Alphabet (-4.80%) continue to be a drag after last week’s reports missed revenue expectations. And Netflix (-5%) has been taking it on the chin despite reporting strong subscriber growth at the beginning of the season.

The Dow went from a 350-point gain to a more than 550-point loss, before finally settling with a slide of 0.99% (or about 245 points) to 24,442.92. One of the main weights on the index was a more than 6.5% plunge in Boeing, which was caused in part by news that the U.S. was ready to put more tariffs on China if upcoming talks between President Donald Trump and President Xi Jinping don’t bear some fruit.

The S&P followed the same course as the other major indices and ended with a slide of 0.66% to 2641.25.

“I loved the reactionary move off a 2600 and that could be a nice bottom, but we need some positive news to get the selling to stop,” said Jeremy in Counterstrike.  

So where is that good news going to come from? Earnings season hasn’t done it yet, but maybe Apple’s upcoming report will snap the market out of this sluggishness. Or perhaps the mid-term elections next week will do it. Then again, the market may need to move down even further before finally hitting a bottom. Sooner or later, stocks will get back on the right path, especially since the economy remains strong and recession is nowhere in sight. The editors are getting ready for the rebound by picking up quality stocks at bargain prices…

Today's Portfolio Highlights:

Large-Cap Trader: The recent pullbacks have cleared some fertile ground for profits in highly-ranked industries. John Blank thinks a little fertilizer will help the green sprout up, so he added CF Industries (CF) on Monday. The company is part of the Fertilizers space, which is in the top 5% of the Zacks Industry Rank. CF is a Zacks Rank #1 (Strong Buy) with above-average Zacks Style Scores and a 2.7% annual dividend. Most importantly, it reports on Wednesday when it will be going for its sixth straight positive earnings surprise. It has an average beat of more than 27% in the past four quarters. Read more about this buy in the complete commentary.

Surprise Trader: For the past six quarters now, SunPower (SPWR) has been easily topping earnings expectations. In fact, last time it beat by more than 96% and has a four-quarter average surprise of nearly 84%. This solar company reports again after the bell tomorrow, and Dave thinks it is poised for yet another outperformance. He added this Zacks Rank #2 (Buy) on Monday with a 12.5% allocation. The editor also sold United Continental (UAL) for an 8.05% profit in less than three weeks. Read the full write-up for more on today’s moves.

Insider Trader: Many stocks have plunged despite strong quarterly reports, leaving insiders with a great opportunity to pick up shares of their own companies at a deep discount. Tracey added two such names on Monday with 10% allocations in global retailer VF Corp. (VFC) and staffing company ASGN Inc. (ASGN). Both stocks are down by double-digit percentages of late despite solid quarterly reports. Most importantly for this portfolio though, VFC and ASGN each saw two insiders buy in recent days. Get a lot more specifics on these new buys in the complete commentary.

Momentum Trader: Every stock has dipped below its 50-day moving average in the recent selloffs. Right? Wrong! Its rare right now, but Dave found a stock that has shown a lot of strength and resilience amid all the turmoil. El Pollo Loco (LOCO) is a restaurant stock that’s weathering this storm better than most, and therefore looks like it has good momentum moving forward. He added LOCO on Monday with a 12.5% allocation. See the full write-up for more.

Black Box Trader: There were several changes in this week’s adjustment with six swaps in all, and one of the stocks leaving the portfolio was a double-digit winner. The positions sold today include:

• Progressive Corp. (PGR, +12.3%)
• Dollar General (DG, +5.66%)
• Sprouts Farmers Market (SFM, +1.85%)
• Target Corp. (TGT)
• C.H. Robinson Worldwide (CHRW)
• Hewlett Packard Enterprise (HPE)

The new buys that replaced these names are:

• Jacobs Engineering (JEC)
• Synchrony Financial (SYF)
• Unum Group (UNUM)
• Exelon Corp. (EXC)
• Spirit Airlines (SAVE)
• Interpublic Group of Cos. (IPG)

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: Insiders know more about their own company than even the analysts do. So it's always a good idea to see what the officers, directors and owners are doing during a selloff. Tracey Ryniec is already keeping score as editor of the Insider Trader, so Kevin wanted her to give an update on insider activity in this week’s Zacks Confidential. Are the insiders buying? If so, who and how much? Read her article and get three stocks with insider buying by clicking: Stocks are on Sale: Will the Insiders Dive In?

All the Best,
Jim Giaquinto

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