Trade Talk Cools Off Record-Setting Market

Stocks have been as hot as the weather over the past few days with several sessions of new all-time highs, but a return of tough trade talk gave us a chance to cool down a bit on Tuesday.

The major indices had been setting new records for the past three sessions in the wake of a couple dovish testimonies from Fed Chair Jerome Powell to Congress last week, which set the stage for a widely-expected rate cut later this month.

But today President Trump stated that a trade deal with China still had “a long way to go” and that new tariffs could always be added.

That’s not what the market wanted to hear, especially at the beginning of an earnings season that could be limited by that very same trade conflict.

So, stocks took a breather.

The Dow almost continued its winning ways on Tuesday, but it eventually slipped 0.09% (or just about 23 points) to 27,335.63. The loss snapped a four-day winning streak.

The S&P ended a five-day run of gains with a slip of 0.34% to 3004.04.

Both of these indices also ended three straight sessions of new all-time highs.

The NASDAQ had the sharpest decline of 0.43% (or about 35 points) to 8222.80.

It’s still extremely early in this earnings season, but reports have been pretty decent so far. In fact, Goldman Sachs and JPMorgan each advanced more than 1% today due to solid quarterly reports.

Before the market opens tomorrow, we’ll get another big financial report from Bank of America. And then after the close we’ll receive our first taste of tech with reports from the likes of Netflix, IBM and Ebay.

Today's Portfolio Highlights:

Marijuana Innovators: Net earnings and revenues were disappointing in the most recent report from Organigram Holdings (OGI)… but Dave isn’t exactly disappointed. He understands that this Canadian producer of cannabis products and the whole nascent industry is in an “uncomfortable period” where companies “have to feel their way around in the dark” when it comes to consumer tastes and regulation. When taking a longer-term view, the editor sees a company that’s innovating everyday and should be in a great position once cannabis derivative products are made available for sale later this year. He’s willing to take a chance on OGI, so he added it to the portfolio on Tuesday. Read the full write-up for a lot more on this new addition. 

Stocks Under $10: Solar stocks have done really well for the portfolio of late, so Brian decided to stay in a strong space by adding Vivint Solar (VSLR). The company provides residential solar energy systems in the U.S. It designs, installs and maintains cost-effective solar energy systems, while also offering photovoltaic installation software products and devices. The basic idea here is to stick with the winners. One of the portfolio’s best performers right now is SunPower (SPWR), a solar name that has gained nearly 50% since being added in late April. The editor is looking for more of the same with VSLR. Read the full write-up for all the specifics.

Surprise Trader: The earnings trend for Novartis (NVS) has been positive this year, as evidenced by its first-quarter earnings surprise of 8.1%. Dave expects another solid report when this Zacks Rank #2 (Buy) large-cap pharma company goes to the plate again before the bell this Thursday, July 18th. NVS has a positive Earnings ESP going into the release. The editor added the stock on Tuesday with a 12.5% allocation. See the full write-up for more.

Counterstrike: The portfolio was right to buy YETI Holdings (YETI) after a plunge back in late May. The stock jumped to $34 from just under $27 when it was added. The outdoor & recreation retailer is up today after pulling back on Monday, so Jeremy thought this was a good time to sell half of the position and bank a nice 21.2% return. He plans to hold onto the other half through YETI’s quarterly report on August 1 as long as estimates stay strong. The editor also sold Zebra Technologies (ZBRA) on Tuesday for a 4.3% profit in less than a month.

TAZR Trader: When the service added Tabula Rasa HealthCare (TRHC) and Splunk (SPLK), they were both out-of-favor stocks with a good risk/reward. These positions performed well for the portfolio but have run into some technical resistance lately. Always looking to stay agile in an unpredictable market, Kevin decided to sell both names on Tuesday. TRHC brought a profit of 16.8% in a little over two months, while SPLK returned 10.5% in less than a month. 

Zacks Short List: Two of three positions that were short-covered in this week's adjustment brought gains to the portfolio. The stocks that exited today included:

• Netflix (NFLX, +3.6%)
• World Wrestling Entertainment (WWE, +2.9%)
• Western Digital (WDC)

The new buys that replaced these names are:

• Gardner Denver Holdings (GDI)
• Palo Alto Networks (PANW)
• Yandex N.V. (YNDX)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Until Tomorrow,
Jim Giaquinto

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