Stocks Fight Past Earnings Jitters for Another Record Close

Here we go!

Earnings season unofficially kicked off today, but the market doesn’t seem too excited. Stocks spent most of the session in the red due to concerns about slowing global growth and tough year-over-year comparisons.

In the end though, the major indices fought through the nerves and finished in the green, which also means they logged another round of all-time highs.

A rally into the close gave the NASDAQ a gain of 0.17% (or about 14 points) to 8258.19. The Dow advanced 0.10% (or about 27 points) to 27,359.16, while the S&P jumped into the green at the last moment with a rise of 0.02% to 3014.30. 

Any increase by the indices marks new all-time highs, so they each made history once again on Monday.

We’re coming back from a strong week for the market that saw the Dow surge 1.5%, the NASDAQ rise 1% and the S&P increase 0.8%.

Stocks enjoyed a big boost last week from a pair of dovish testimonies from Fed Chair Jerome Powell, who seemed open to a rate cut later this month due to several challenges facing the market.

But while last week was all about the Fed, this one will likely be about earnings.

Citigroup kicked things off before the bell on Monday and reported results that topped expectations. However, shares dipped slightly by 0.08% by the close.

Before the bell even rings on Tuesday, we’ll have reports from other big banks like JPMorgan and Wells Fargo. Bank of America comes on Wednesday.

We’ll also be getting some major tech names in the next few days, including the first FAANG report from Netflix on Wednesday. IBM comes the same day and then Microsoft on Thursday.  

Simply put, a better-than-expected earnings season means this market could continue setting new records. But if it can’t handle the lowered expectations, then the market may see a nice selloff.

We’ll have a better idea on which way it goes by the end of this week.

Today's Portfolio Highlights:

Counterstrike: For guys that hate to go shopping, Stitch Fix (SFIX) is an easy way to find your style at a small subscription cost. That’s not marketing from the company… but a testimonial from new customer Jeremy. He’s also impressed by SFIX as an investor, especially after it reported a positive surprise of 333% that sent the stock soaring. Now it has pulled back, leaving the short-sellers (27% of the float) in a dangerous situation on any good news. The editor wants to get in before the squeeze, so he added SFIX on Monday with a 10% allocation. Read the full write-up for more.

Surprise Trader: For the past 20 consecutive quarters, Omnicom Group (OMC) has either met or beaten the Zacks Consensus Estimate. Dave believes this marketing communications company will continue that streak when it reports before the bell this Wednesday, July 17th. The company has a positive Earnings ESP for the quarter and has moved to over $85 from the lows under $78. Read the full write-up for more on today’s addition of OMC.

Stocks Under $10: With today’s addition of Golden Star Resources (GSS), this portfolio is now fully invested with 15 positions. This Zacks Rank #2 (Buy) is a gold miner with a number of gold exploration properties in West Africa, including the Wassa gold project in Ghana. Some people think gold is going to reach 1800, which is a level not seen since 2011. The addition of GSS on Monday is a play on this expectation, while also offering some diversification to the portfolio. Read the complete commentary for a lot more on this new addition.

Options Trader: In addition to rising sales and earnings, Home Depot (HD) also has a fine valuation and a chart that’s signaling an upside breakout. Kevin decided to add some bull call spreads in this home improvement giant by buying to open 2 November 220.00 Calls AND selling to open 2 November 230.00 Calls. If HD gets to $230 or higher by the mid-November expiration, then this portfolio will make 140%. Read the complete commentary for more specifics on this move. 

Black Box Trader: The portfolio is banking a lot of positive returns in this week's adjustment as five of the six departing names were profitable. The positions that left the service today were:

• RH (RH, +8.2%)
• Ciena (CIEN, +5.1%)
• HP (HPQ, +2.9%)
• Arch Capital Group (ACGL, +1.2%)
• Kimberly-Clark (KMB, +0.75%)
• Aflac (AFL)

The new buys that replaced these names are:

• Alaska Air Group (ALK)
• American International Group (AIG)
• Ingersoll-Rand (IR)
• Jefferies Financial Group (JEF)
• Summit Materials (SUM)
• Walmart (WMT)

Read the Black Box Trader’s Guide to learn more about this computer-driven service designed to take the emotion out of investing.

All the Best,
Jim Giaquinto

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