Stocks Take Another Small Step Back

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Stocks are still taking a breather after the hot start to June, as the major indices slipped for a second consecutive session though remain just a few steps away from all-time highs.

After leading the way in last week’s rally, tech took a few steps back in recent sessions. Therefore, the NASDAQ had the sharpest loss on Wednesday, though it was only off 0.38% to 7792.72.

The other major indices are holding onto recently-recaptured milestones. The S&P has left 2800 in the dust and is very close to 2900 despite slipping 0.20% to 2879.84.

The Dow made it back to 26,000 on Monday, but its barely hanging onto that level after today’s decline of 0.17% (or about 44 points) to 26,004.83.

Stocks remain solidly higher for the month and are even up barely through Wednesday.

Last week, the major indices broke losing streaks ranging from four to six weeks with an impressive rally sparked by the accommodative Fed and a trade deal with Mexico.

But the past two days have been stuck in a low volume zone as stocks take a break and search for the next reason to move.

What could that next catalyst be? Well, the most important event in the near term could be next week’s Fed meeting, since Powell & Friends are the main reason for this strong market in 2019 after its sudden dovish turn in January.

Then there’s the G-20 meeting the week after, which will hopefully include a sit-down with President Trump and China President Xi. The Pollyannish view is that these two guys can finally work out a trade deal, but the market would probably be content with the two sides saying nice things about each other and getting back to trade negotiations.

And then there’s also earnings season about a month from now.

In the meantime, the editors believe the market could use a nice pause after the recent runup.

Today's Portfolio Highlights:

Insider Trader: Shares of small-cap medical products company Sientra (SIEN) have plunged 50% so far this year… but a few insiders think the stock has finally bottomed. On June 7, the company initiated a secondary financing that raised just over $100 million to keep it going until turning profitable. On the same day, the CFO and two directors bought shares of their own company, which Tracey considered a signal that they think the selloff is overdone. The editor decided to take a chance with Sientra (SIEN) by adding it to the portfolio on Wednesday with an 8% allocation, despite the potential for volatility. Read the complete commentary for more on this new buy. Tracey also sold half of Wayfair (W) for a more than 7% profit in less than two months and still has some cash on hand for future moves. 

Counterstrike: "Today had that feeling of summer as low volume and choppy trading was the theme. While there have been some moments over the last few weeks where it felt like summer trading, today was the first day it felt dead. Markets continued to consolidate on the low volume, but we really haven’t gone anywhere this week.

"I’m always looking for signals in market direction, but everything I have been looking at lately has been pretty meaningless. Simply put, the market is confused on what to do. It is waiting for the next headline because that has driven the markets over the last year. When we have a rally like we have seen over the last week, it’s hard to move the market without something of substance. And because we are a month away from earnings season or a China trade deal, the next catalyst will be the Fed next week. Until that meeting, expect the markets to be relatively boring.

"But hey, that’s not a bad thing, we all could use a little slowing down. Just don’t overtrade when the market slows down like this. Traders often chew themselves up in this environment when they should be sitting on their hands. Be patient, pick your spots and stay discipline as we hit these summer days." -- Jeremy Mullin

Until Tomorrow,
Jim Giaquinto

P.S.: We’ve just released our new 5 Stocks Set to Double special report, which includes five stocks our team believes have the potential to grow +100% in the next 12 months. This latest report features favorite stocks from Kevin Cook, Tracey Ryniec, Ben Rains, Dan Laboe and David Borun. Log on to Zacks.com to see these stocks today.

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