Another Small Decline as We Wait on Trade

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With a trade deadline less than a week away, we saw another modestly lower session on Tuesday as stocks don’t have much of a reason to move right now.

The major indices spent some time in the green today, but again sold off into the close as we got more conflicting news on the upcoming tariffs.  

The S&P finished lower by 0.11% to 3132.52, while the Dow slipped 0.10% (or nearly 28 points) to 27,881.72. The NASDAQ was down 0.07% (or a little more than 5 points) to 8616.18.

That makes two consecutive days in the red to start this week, though the losses have been modest as the market takes a ‘wait-and-see’ approach with this Sunday’s deadline.  

The major indices’ declines in these two days are less than a half-percent.

It looked like we might get a nice rally after the Wall Street Journal reported that the two sides were open to a delay of the new tariffs.

However, White House officials subsequently stated that fresh tariffs are still on the table. That kept a lid on any further advances.

So stocks are having trouble moving higher in the shadow of all this uncertainty, but are staying in the neighborhood of all-time highs and willing to break upwards on any good news.

Speaking of good news, we did get some on Tuesday for a different trade deal. The White House and House Dems have worked out a deal to move forward with USMCA, the U.S./Mexico/Canada trade accord that replaces NAFTA.

Among all this trade stuff, let’s not forget that the Fed is meeting this week as well. This time, though, no one is expecting a rate cut, especially since the Committee has already slashed three times this year. Unless there’s some surprise, it shouldn’t be much of a factor.

Today's Portfolio Highlights:

Options Trader: The chart for Global Payments (GPN) shows that the stock recently broke out of a head and shoulders ‘failure” pattern and is coming out of its subsequent ‘return move’. Both of these moves are bullish for this electronic transaction processing services company, prompting Kevin to add a few bull call spreads in this Zacks Rank #1 (Strong Buy). He bought to open three May 180.00 Calls AND sold to open three May 190.00 Calls. The editor also appreciates that GPN’s 1-yr projected sales and EPS growth both “significantly” outpace the S&P and its industry. If GPN can get to $190 by their mid-May expiration, then these moves will bring a 163% gain. Read the full write-up for more specifics on today’s signal.

Surprise Trader: Athleisure has been one of the brightest spots in the retail space, and it just so happens that one of the major names is reporting after the bell tomorrow. Lululemon (LULU) has a positive Earnings ESP of 1.28% heading into the announcement, so Dave added the stock on Tuesday with a 12.5% allocation. The editor also sold Jazz Pharma (JAZZ) for a more than 18% return in less than two months and American Outdoor Brands (AOBC) for a slight loss. Read the full write-up for more on these moves and be prepared for more selling as we head into the new year. 

Home Run Investor: With all of these trade headlines swirling around, Brian thought this was a good time to ‘de-risk’ the portfolio a bit. And he decided to do it by selling the service’s biggest winner, Synaptics (SYNA). This human interface solutions company has been in the portfolio since late July and leaves today securing a nice profit of over 74%! Basically, that impressive return would be in danger if the trade deal doesn’t happen or isn’t what the market expected. Brian also cut a couple losers by selling OneSpan (OSPN) and 8x8 (EGHT).

Zacks Short List: The portfolio only had one swap in this week’s adjustment, as Yelp (YELP) was short-covered for a gain of approximately 8% and then replaced through the addition of Cheniere Energy (LNG). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Have a Great Evening,
Jim Giaquinto

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