Hope for a pre-election stimulus deal was not enough to give the market a second straight session of gains, as stocks moved slightly lower Wednesday after some back-and-forth action.
We’re kind of in a limbo right now when it comes to this stimulus deal. The two sides have different ideas what the relief would look like, but they’re pretty much saying the same thing right now: ‘We’re making progress and are optimistic, but we’re still far away from an agreement’.
Where does that leave the market? Well, today it left us with a moderately lower session and the second decline in the past three days.
The S&P was off 0.22% to 3435.56, while the NASDAQ slipped 0.28% (or almost 32 points) to 11,484.69. The Dow declined 0.35% (or nearly 98 points) to 28,210.82.
The market has been treading water since Monday’s sharp plunge of well over 1% as it waits for some kind of breakthrough in Washington.
With the election now less than two weeks away, investors apparently require a little more than encouraging words to rally. They’d like to see some real action, but sentiment on this front is growing gloomier by the day.
Meanwhile, Netflix (NFLX) slumped nearly 7% on Wednesday after the streaming giant’s disappointing third-quarter report last night that included much fewer paid subscriber additions than expected.
But Snap (SNAP) soared more than 28% after the mobile camera application shocked the market with a third-quarter profit. It also positively surprises on revenue and daily active users.
The big report after the close today was electric car pioneer Tesla (TSLA), which beat on both earnings and revenues. Shares are up approximately 2.8% after hours, as of this writing.
Tomorrow will be the busiest day of earnings this week with reports from the likes of Intel (INTC), Coca-Cola (KO), AT&T (T), Danaher (DHR), Union Pacific (UNP) and dozens of others.
Today’s Portfolio Highlights:
Options Trader: For the second time in the past three days, Kevin added two names to the portfolio. On Wednesday, the editor bought to open an April 100.00 Call in Yum Brands (YUM) and bought to open a March 135.00 Call in Nasdaq (NDAQ). YUM is the world’s largest restaurant company in terms of units with brands that include KFC, Pizza Hut and Taco Bell. This Zacks Rank #2 (Buy) has a 3.65% positive Earnings ESP for the quarter coming on October 29 and a chart that looks poised for a breakout. NDAQ is a holding company that provides trading, clearing, exchange technology, securities listing, information and public company services. This Zacks Rank #3 (Hold) just reported a solid quarter with a positive earnings surprise of 5.51% and a positive sales surprise of 3.92%. Kevin expects the stock to continue moving higher. Read the full write-up for more specifics on these moves.
Surprise Trader: For the past six quarters in a row, Century Communities (CCS) has beaten the Zacks Consensus Estimate. And it looks set to do it again after the bell on Wednesday, October 28. The home building and construction company has a positive Earnings ESP of 7.53% for the report. Dave has pulled a lot of profit out of the home builders industry, which is in the top 2% of the Zacks Industry Rank, and he plans to do it again with CCS. The editor added this stock on Wednesday with an 11.9% allocation, while also selling the “disappointing” Silgan (SLGN) position. The full write-up has more on today’s moves.
Commodity Innovators: Shares of Freeport-McMoRan (FCX) have soared along with the prices of copper, gold and silver. In fact, the stock has gained so much that even a strong earnings report tomorrow might not be able to push it any higher. Therefore, Jeremy decided to sell this miner on the eve of its earnings announcement to secure a nice return of more than 55% in a little under four months. The editor will be looking to get back into FCX down the road at a lower price.
Home Run Investor: The portfolio cashed in a double-digit winner on Wednesday, but retained its exposure to a hot space. Brian sold water management and drainage solutions company Advanced Drainage Systems (WMS) for a 12.7% return in just a little over two months. The new buy is Arcosa (ACA), which is also in the building products space as a manufacturer of infrastructure-related products and services. ACA has topped the Zacks Consensus Estimate in each of the last four quarters with an average surprise of 37%. Annual earnings estimates have been moving higher, which helped the stock attain Zacks Rank #2 (Buy) status. Basically, ACA has a better valuation than WMS, so this trade allows the portfolio to make some money and stay in a strong industry with potential for even more profits down the road. Read the full write-up for more info on this action.
Counterstrike: Sometimes those algos can be “very nasty”. But that’s all right! This portfolio thrives on the chaos that they bring. For example, iRobot (IRBT) beat earnings by 183% last night and raised its guidance… yet shares of this robots manufacturer are down double-digits today. Jeremy thinks that was unnecessary for the maker of Roomba robot vacuums, so he added IRBT on Wednesday with a 5% allocation. Read the full write-up for more.
Technology Innovators: The best performer on Wednesday among all ZU services was easily Calix (CALX), which soared 20.5%. The result more than doubled the next best mover. This global leader in access innovation added onto its impressive earnings history with strong third quarter results that included better-than-expected numbers for both the top and bottom lines. Brian considers CALX to be a cloud play and he added it back in mid-July. Since then, it has become one of the portfolio’s biggest winners with a rise of over 64% since inception.
Have a Great Evening,
Jim Giaquinto
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