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Stocks Jump 2%+ on Solid Earnings

Hip hip hooray for earnings season!

Each of the major indices surged more than 2% on Tuesday as a collection of positive reports gave the market its biggest rally since last week’s pullback. Stocks moved upward throughout the session and even closed at their highs.

The NASDAQ has been lagging its counterparts for weeks now, so it’s only fitting that this index would see the biggest percentage increase as tech resumed its role as a market leader. It soared 2.89% (or nearly 215 points) today to 7645.49. That makes two gains of 2%+ in the past three days.

The FANGs snapped back enthusiastically on Tuesday, but most people were waiting on Netflix after the bell. The streaming giant was the first of the group to report earnings… and it didn’t disappoint. As of this writing, shares are up more than 11% afterhours thanks to a big beat in subscriber growth. The stock was also the best performer of the FANGs during the session with an increase of nearly 4%.

The Dow roared higher by 2.17% (or nearly 550 points) to 25,798.42 on strong reports from the likes of UnitedHealth (4.73%), Goldman Sachs (+3.01%) and Johnson & Johnson (+1.95%). JPMorgan, which kicked things off on Friday with a solid performance, climbed 2.14%. However, IBM was a bit of a disappointment after the bell and is off about 4% afterhours, as of this writing.

The S&P has been down in the dumps for seven of the past eight sessions, but even this index came along for the bullish ride. It jumped 2.15% to 2809.92.

So the market took a good-sized bite out of last week’s pullback today…and earnings season is just getting started. As stated previously, we’re expecting some strong numbers to be reported with earnings growth of more than 18% and revenue growth of over 7%. The issues that plagued us last week (especially rising rates and trade) continue to be a problem, but hopefully the market has broken out of its melancholy and can refocus on this strong economy moving forward. Fingers crossed…

Today's Portfolio Highlights:

Stocks Under $10:
Tomorrow is a big day for the marijuana movement as Canada becomes the biggest country yet to legalize pot. And while some folks think this is the time to “sell the news”, Brian Bolan believes that the super-hot pot market still has plenty of legs as it becomes more accepted around the world. Therefore, on Tuesday he picked up Corbus Pharma (CRBP), a biotech that treats inflammatory and fibrotic diseases by targeting the endocannabinoid system. The editor believes CRBP will follow some of the bigger pot names higher. Plus, the company has other drugs in the pipeline that are not CBD related. The complete commentary has a lot more on this new addition.

Surprise Trader: No portfolio moves as quickly as this one does during earnings season. Case in point, Dave added ADTRAN (ADTN) this morning on the same day it reports earnings. This Zacks Rank #2 (Buy) is part of the global networking and communications equipment industry, which is ranked in the top 14% of the Zacks Industry Rank. The company has a nice Earnings ESP of 33% for the report coming after the bell today when it is expected to return to profitability. The editor added ADTN with a 12.5% allocation. Read the full write-up for more.

Counterstrike: Jeremy has been chomping at the bit to add something to the portfolio for over a week now…and the market is finally cooperating! As stocks were rallying this morning, the editor added a name that was a double-digit winner for the service in August. Restoration Hardware (RH) is a Zacks Rank #1 (Strong Buy) luxury furniture company that dropped below its 200 day MA amid a flurry of short sellers following its quarterly report. But a buyback program has turned things around and convinced Jeremy to buy RH again. He would add on any pullback to the 200-day and expects it to bounce back to the 50-day…and possibly much further. Read the complete commentary for more.

Income Investor: One rally is not going to change Ryan’s recent strategy of protecting profits and reducing exposure to underperforming groups. He’s especially wary of semiconductors right now, which have been under pressure of late with no relief in sight. KLA-Tencor (KLAC) suffered through “a beast of a correction in recent months” due in large part to its warning of a “modestly weaker” December quarter. And then just yesterday it was downgraded by an investment bank. The editor has seen enough and wants to protect the profit while he’s still got it. Therefore, KLAC was sold on Tuesday for a 13.24% return.

Zacks Short List:
All three of the positions leaving the portfolio this week had nice profits due to the recent pullback. The stocks that were short-covered include:

• Estee Lauder Cos. (EL, +8.95%)
• QUALCOMM (QCOM, +6.72%)
• Netflix (NFLX, +5.19%)

The new buys that replaced these names are:

• Alibaba (BABA)
• Incyte Corp. (INCY)
• Newmont Mining (NEM)

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

All the Best,
Jim Giaquinto

Recommendations from Zacks' Private Portfolios:

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