Late Rally Lifts Stocks Despite Coronavirus Concerns

This skittish market staged a late-day rally on Thursday, the same day that the World Health Organization officially designated the coronavirus as a global health emergency.

Go figure!

Perhaps the virus-induced selloffs during this solid earnings season brought out the bargain hunters.

In the end, the Dow went from a more than 240-point loss to a gain of 125 points. The index rose 0.43% to 28,859.44, and most of that came in the final hour.

The S&P rose 0.31% to 3283.66 and the NASDAQ advanced 0.26% (or nearly 24 points) to 9298.93. These indices also spent most of the day solidly in the red before a late-day rebound.

Stocks have been under pressure all week due to the coronavirus, which continues to spread and recently had its first case of person-to-person transmission here in the U.S.

However, while declaring the sickness an emergency, WHO also said that a travel ban was unnecessary and complimented China on its response.

Stocks used the more reassuring parts of WHO’s statement to come off their lows and focus more on earnings season.

Two of last night’s big after-the-bell reports had strong sessions on Thursday. Shares of Tesla soared 10% after its better-than-expected results and Microsoft rose 2.8%.

However, Facebook dipped more than 6%.

The major report after the bell today was Amazon, which trounced expectations and offered an encouraging guidance. The e-commerce giant became the latest trillion-dollar company and is up more than 11% afterhours as of this writing.

Despite solid results on Tuesday and today, the major indices still have not made up for Monday’s selloff and go into Friday’s session with losses over the past four days. All of the major indices slipped last week, ending the NASDAQ’s six-week winning streak.  

However, the losses are all less than 0.5%. So maybe Amazon can help the indices get into the green for the week in tomorrow’s session… if there are no surprises with the coronavirus. 

Today's Portfolio Highlights: 

Surprise Trader: The popularity of natural and organic foods has pushed the Foods – Miscellaneous space into the Top 38% of the Zacks Industry Rank. One of the big names from this area is Hain Celestial (HAIN). This Zacks Rank #2 (Buy) has a positive Earnings ESP of 5.26% for the quarter coming before the bell on Thursday, February 6. Last time, it beat by more than 14%. Dave added HAIN today with a 12.5% allocation. The portfolio also sold PolyOne (POL). Read the full write-up for more. 

Large-Cap Trader: This is NOT the time to get involved with tech stocks, according to John, since they are most likely to suffer profit-taking in the near future. But that doesn’t mean you can’t buy other industries. Case in point, the editor used nearly all of the portfolio’s available cash and split it evenly across these three picks:  

• Lowe’s Companies (LOW), a Zacks Rank #2 (Buy) home improvement giant
• Neurocrine Biosciences (NBIX), a Zacks Rank #2 (Buy) drug company
• Pilgrim’s Pride (PPC), a Zacks Rank #1 (Strong Buy) chicken company

All of these companies report next month, have solid Zacks Style Scores and are from highly-ranked industries (especially PPC in the Top 8%). The allocations come to about 4.67% in each name. Read John’s complete commentary for more specifics on each of these positions.

Counterstrike: "Moving past the virus, GDP came above expectations with 2.1% vs 2.0% expected. This is a steady as she geos number and the bulls seemed to give a positive response with buying off the open.

"Earnings continue to be strong and typically see a great response after the EPS announcements. There are some losers of course, but when you look at TSLA, MSFT, NOW and LRCX, we are seeing some great moves. Looking after hours, Amazon killed it and traded up almost 200 points after hours.

"Amazon should help markets tomorrow even if we see some more scary numbers out of China. The fact that no travel ban is suggested helped market today. As long as that factor stays in place, I think markets will hold up ok." -- Jeremy Mullin

All the Best,
Jim Giaquinto

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