New Trade Talks Bring a 'Better Late Than Never' Rally

The market got another positive headline on Thursday… and this one set off an even steeper rally than yesterday with each of the major indices soaring well past 1%.

It looks like high-level meetings between U.S. and China negotiators will be taking place early next month in Washington D.C.

You may remember that such talks were originally expected to happen this month, but that was before this latest round of tariffs.

The market decided: “Better late than never!”

A strong day for technology launched the NASDAQ higher by 1.75% (or nearly 140 points) to 8116.83, while the Dow jumped 1.41% (or about 372 points) to 26,728.15.

The S&P rose 1.3% to 2976, which means the index is now well within 2% of its all-time high.

This makes two strong sessions in a row for stocks. Yesterday, the market took off after Hong Kong withdrew the extradition bill that sparked several months of huge protests.

But not all the good news of late stems from trade or China. On Thursday, the ISM Services report rebounded from a three-year low by blowing past expectations to 56.4 in August.

It was a nice change of pace from the manufacturing index on Tuesday, which showed the first contraction in over three years. (For both reports, a reading above 50 indicates expansion while below 50 indicates contraction.)

We also got a strong ADP report today that said private payrolls in August rose by 195,000, which easily topped expectations.

While it’s a nice number, investors are really hoping that it’s a sign for a stellar Government Employment Situation report tomorrow. Last month, the economy added 164,000 jobs, which was inline with expectations.

So two positive headlines in two days. Let’s hope the jobs report tomorrow makes it three!

Today's Portfolio Highlights:

Blockchain Innovators: In addition to operating the very popular online retail exchange Forex.com, Gain Capital (GCAP) also allows clients to buy and sell cryptocurrencies. The company is rebounding after hitting bottom in late June, which will impact the full year’s earnings. However, next quarter and next year’s earnings are expected to soar by well over 200% for each period. Dave added GCAP on Thursday to get in before it takes off. Read the full write-up for more.

Income Investor: Shares of credit card giant Discover Financial Services (DFS) have jumped 40% so far this year. However, Maddy thinks this stock has room to run even higher given its low valuation and the growth in its lesser-known personal & student loans division. Plus, the company raised its dividend by about 14% last year, marking its 9th straight year with a hike. It yields about 2.2%. Read the complete commentary for more on today’s addition of DFS.

Counterstrike: When Jeremy bought VelocityShares 3X Long Gold ETN (UGLD) back in July, he said this position would go “nuts” if gold breaks out. Well it did! Fears of recession sent investors flocking toward this safe haven. But today stocks are soaring on renewed trade talks, so the editor felt this was a good time to sell UGLD for a 22.9% return in about two months. He also short-covered GoDaddy (GDDY) for a 2.9% profit. Read the complete commentary for more on all of today’s moves.

Surprise Trader: It’s been a rough session for GMS (GMS), so Dave decided to sell this distributor of wallboard and suspended ceilings systems while he can still get a double-digit return. The position brings a profit of 15.3% to the portfolio in just a little over a week! The editor also sold Bank of Nova Scotia (BNS) for a 5.6% return in about two weeks. 

Options Trader: “Reports that the U.S. and China have finally scheduled their highly anticipated face to face trade meeting for early October, further underscored the trade optimism that’s been building for the last couple of weeks.

“Deputy-level officials from both sides will work together in September before the high-level officials meet in Washington in October.

“At the moment, expectations for a full-blown trade deal are low. But there’s plenty of hope that a lessening of tensions or a ‘trade truce’ can be achieved. 

“Either way, traders cheered the latest developments. And getting the two largest economies to agree to talk constructively is a bit of an accomplishment itself.” – Kevin Matras

All the Best,
Jim Giaquinto

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