Stocks Step Back Amid Weak Economic Data and Earnings Reports

The reality of this economic shutdown caught up with the market on Wednesday, as weak data on several fronts sent each of the major indices down by more than 1%.

We’ve all been feeling a lot better lately as the coronavirus spread slows, which means the focus is quickly turning toward getting the economy back on its feet. The numbers today remind us just how much damage has been done in the effort to ‘flatten the curve’.

Retail sales plunged 8.7% in March. Not only did this blow past expectations for a decline of a little more than 7%, but it was also the biggest drop in the history of that report.

And that wasn’t all. There was also rough data for industrial production, New York manufacturing and homebuilder sentiment.

And earnings provided no solace with the big banks reporting double-digit declines in profit as the season gets underway. They’re also putting billions aside to compensate for future losses that are expected to be severe.

Bank of America (BAC) reported today and slipped 6.5%, while Citigroup (C) was off 5.6%. Goldman Sachs (GS) also announced a rough quarter, but managed to end higher by 0.16%.

Given the weak data, disappointing earnings reports and the 12% rally last week; the major indices were due for some pullback. And that’s what we got today.

The NASDAQ’s four-day winning streak is now over after sliding 1.44% (or about 122 points) to 8393.18. However, some of the ‘stay-at-home’ names are still rising, including Netflix (NFLX, +3.2%) and Amazon (AMZN, +1.07%).

The Dow slipped 1.86% (or around 445 points) to 23,504.35 and the S&P was off 2.2% to 2783.36.

However, stocks came well off their lows. The Dow had plunged more than 700 points at its lowest.

For a market that’s just a few weeks removed from numerous circuit breakers, the rather modest pullback today could be considered a sign of resilience.

The NASDAQ is still up for the week, while its counterparts are just slightly underwater heading into Thursday.

So this is what we have to look forward to in the weeks ahead. Soft earnings reports and bad data. But if the coronavirus spread continues to slow, then just behind all this disheartening news should be a very impressive recovery.

Today's Portfolio Highlights: 

Home Run Investor: The large number of people working from home during this outbreak has led to an uptick in demand for the products of Plantronics (PLT), especially its enterprise headsets. As a result, the company raised its revenue guidance for the fourth quarter. Shares of PLT soared by nearly 13% on the news. However, Brian picked this company up on Wednesday at the lows of the day, proving a fantastic entry point. He likes this Zacks Rank #2 (Buy) audio communications leader for various reasons, including beating earnings three times in the past four quarters, having a nice valuation and the 14% short interest that should be getting covered in the coming weeks. The editor expects a solid tailwind moving forward for PLT. This addition marks the 12th name in the portfolio in Brian’s push to get back to 15 names by the end of the month, so expect another addition later this week.

Surprise Trader: Given all the people working from home during this outbreak, it only makes sense that companies supporting such a change will benefit. That’s why Dave added Netgear (NTGR) on Wednesday. The company is a global telecommunications firm that offers innovative networking and Internet connected products for seamless networking, broadband access and network connectivity. NTGR has beaten the Zacks Consensus Estimate for four straight quarters, and now has an impressive Earnings ESP of 35.85% for the quarter coming after the bell on Wednesday, April 22. The editor added the stock with a 12.5% allocation. Read the full write-up for more. 

Insider Trader: A lot of people just don’t trust the market’s recent rally… and you can count Tracey among them. Therefore, the editor took some profits on Wednesday while they were still available. She sold storage REIT Jernigan Capital (JCAP) since its starting to come down from its recent ‘euphoric’ gains. It brings a profit of nearly 19% in less than 2 weeks! The portfolio also sold half of Mosaic (MOS) for a return of 8% in just a little over a month. Tracey will let the market decide how long she holds onto the other half.

Have a Great Evening,
Jim Giaquinto

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