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Bumpy Road to Trade Talks

Jim Giaquinto

These trade talks can’t come soon enough! We just had another rough session as sentiment seems to be worsening in the runup to Thursday’s meeting.   

In fact, the losses on Tuesday were many times worse than yesterday.

The NASDAQ dropped 1.67% (or about 132 points) to 7823.78 and the S&P slipped 1.56% to 2893.06. The Dow was off 1.19% (or around 314 points) to 26,164.04.

The major indices were in the red all day, but took a header late and closed right around the lows of the session.

For a brief moment there, it looked like the indices may actually turn positive on dovish comments from Fed Chair Jerome Powell.

At an appearance in Denver today, he stated that the Fed would expand its balance sheet soon and that there’s “no reason why the expansion can’t continue”.  

But the good feeling didn’t last long as the next headline was about the U.S. putting visa restrictions on some Chinese officials due to the detention of Muslims in the Xinjiang region. The algos really took the news and ran with it, sending the market on its final hour plunge.

This comes less than a day after the U.S. added several Chinese firms to its trade blacklist, which means those companies would be barred from buying American components without government approval.   

And this is all happening in a week when the U.S. and China are expected to meet in Washington D.C. for trade negotiations! So it’s easy to see why investors are growing less optimistic that anything can get done.

We’ve got one more day before the talks are scheduled to begin. What’s the next headline going to be? Nobody knows, which is why the market is so skittish right now. Maybe this is one of those “darkest before the dawn” scenarios for this trade conflict. Hope springs eternal!

Today's Portfolio Highlights:

Surprise Trader: With the next earnings season set to begin shortly, Dave thought this was a good time to “clean out the closet”. He sold the portfolio’s remaining three positions, which included cashing in Zumiez (ZUMZ) for a 15.9% return in just a little over a month. The editor also sold Buckle (BKE) for a 7.6% profit in less than two months and Micron (MU) for a loss.  

Zacks Short List: The portfolio swapped two positions in this week's adjustment and cashed in a double-digit winner. The stocks that were short-covered include Alteryx (AYX, +12.9%) and Inphi Corp. (IPHI). The new buys that replaced these names were Cheniere Energy (LNG) and QUALCOMM (QCOM). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Have a Good Evening,
Jim Giaquinto

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