New Highs All Around on Delayed Reaction to Trade Deal

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Now that’s more like it!

After barely moving on Friday despite the Phase 1 trade deal, the major indices enjoyed a much more respectable rally on Monday that included new records all around.

The NASDAQ jumped 0.91% (or nearly 80 points) to 8814.23 and the S&P rose 0.71% to 3191.45.

The Dow finished at its low of the day, but was still up 0.36% (or 100 points) to 28,235.89. The index would have had a much better showing if Boeing had cooperated. Instead, the aerospace giant dropped 4.3% on a report that it was thinking about halting or further cutting production of the 737 Max.

Later in the day, we found out that Boeing will suspend production next month.

Nevertheless, the major indices all made new highs on Monday with their fourth consecutive day in the green.

That’s a whole lot better than the 0.1% advance that the S&P and Dow had on Friday! After Dec. 15 came and went without new tariffs, investors must have realized that the situation could've been much worse.

Despite the lackluster session on Friday, stocks are returning from a positive week that saw the NASDAQ climb by 0.9%. The S&P was up 0.7% for its third consecutive week of gains and the Dow increased 0.4%.

In addition to good trade news, last week also included a statement from the Fed that rates are unlikely to be raised throughout 2020.

So it would appear that stocks have a clear path through the end of the year. Bulls are in control as we start the final full week of 2019 ahead of the Christmas and New Year’s holidays.

If nothing comes along to derail the momentum, then the bulls should be able to keep moving forward and eventually pass the ball to Santa later this month.

Today's Portfolio Highlights:

Blockchain Innovators: As a provider of connectivity products and services for the Internet of Things (IoT), Digi International (DGII) uses blockchain to provide security across its product line. This Zacks Rank #1 (Strong Buy) beat the Zacks Consensus Estimate by more than 157% in its most recent report and has a four-quarter average surprise of nearly 200%. Perhaps more importantly, sales are expected to growth nearly 25% this year with earnings forecasted to jump more than 41% next year. Dave also sold International Money Express (IMXI) to ‘trim the fat’ with an eye on a ‘leaner’ portfolio in 2020. Read the complete commentary for more on today’s moves.

Home Run Investor: Like the market in general, Brian is feeling pretty good about the Phase 1 trade agreement. So good, in fact, the editor decided to make a move on Monday by adding Ichor Holdings (ICHR). This Zacks Rank #2 (Buy) is from the “hot” chip space, as it focuses on critical fluid delivery subsystems for semiconductor capital equipment. The stock reported a positive earnings surprise in its recent report and its valuation is looking pretty good. Shares were down a bit this morning, so Brian acted quickly to buy it at a better entry price. The portfolio also sold El Pollo Loco (LOCO) today. See the full write up for more on today’s action.

Counterstrike: After 16 months in the doldrums, Jeremy thinks that the Chinese Internet search provider Baidu (BIDU) has finally reached a bottom. While the chart still doesn’t look great, the stock has put together a couple EPS surprises of more than 40% and is enjoying increased traffic on its Baidu App. The editor thinks BIDU could continue its momentum given the trade agreement, so a recent pullback provided a great opportunity to get involved. Plus, it’s a Zacks Rank #1 (Strong Buy)! Jeremy added BIDU with a 10% allocation. The portfolio also sold Alteryx (AYX) for a more than 3% return and Boeing (BA). Read the full write-up for more.

Technology Innovators: Now that we have a Phase 1 trade agreement (in principle at least), Brian has some buying to do in this portfolio. The plan is to add at least three names this week! The editor started on Monday by picking up Healthstream (HSTM), a Zacks Rank #2 (Buy) that offers a suite of solutions to healthcare employees for workforce development, training & learning management, talent management, credentialing, privileging, provider enrollment, performance assessment, and managing simulation-based education programs. Read the full write-up for more on this new addition.

Black Box Trader: This week’s adjustment included only two swaps. The portfolio sold The TJX Companies (TJX) and Builders FirstSource (BLDR), and replaced them by adding Best Buy (BBY) and SS&C Technologies (SSNC). Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.

All the Best,
Jim Giaquinto

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