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Record-Setting Run Continues Despite Low Volume

Record-Setting Run Continues Despite Low Volume

This story originally appeared on Zacks

We saw another low volume, slow grind higher on Wednesday, but the small advances still kept the market on its record-setting pace as investors prepare for the beginning of the virtual Jackson Hole Economic Symposium.

“The market didn’t even feel like it was open today, but we still managed to grind out a positive session,” said Jeremy Mullin in Counterstrike. “This is Christmas Eve or day after Thanksgiving volumes so you can get why I’m poking fun at the inactivity.”

The S&P was the “big” winner today with a gain of 0.22% to 4496.19, while the NASDAQ spent its second session above 15K by advancing 0.15% (or about 22 points) to 15,041.86. Each of these indices now have five-day winning streaks. Furthermore, the S&P has closed at record highs in the past two sessions, while the NASDAQ has done so in the past three.

The Dow is on a nice four-day run of its own after rising 0.11% (or nearly 40 points) to 35,405.50, or about 0.6% away from making its own new high that was set just a week-and-a-half ago. The index got a little roughed up after last Wednesday’s Fed minutes from its July meeting, which saw several members warm up to changing the monetary policy.

And those minutes are why people are biting their fingernails over the virtual Jackson Hole meeting, which starts tomorrow. Will some sort of taper timeline be announced on Friday when Fed Chair Jerome Powell makes his remarks? Investors know its on the horizon, but don’t want a change to come too soon while the delta variant is still having an impact.  

In other news on Wednesday, the latest retailer to make noise in the market was DICK’S Sporting Goods (DKS), which rose 13.3% after a strong second quarter report. EPS beat the Zacks Consensus Estimate by more than 81%, while revenue jumped over 20% year over year and also topped expectations.

And after the bell today, salesforce.com (CRM) also reported strong quarterly results with a positive earnings surprise of more than 62%. Shares of this CRM software giant are up more than 2.6% after hours, as of this writing.

Today's Portfolio Highlights:

Home Run Investor: A lot of people used the shutdown to go back to school, which explains why Stride (LRN) had such a great financial performance throughout the pandemic. LRN is a career learning business that has beaten the Zacks Consensus Estimate for the past seven consecutive quarters with an average surprise of 69% over the past four. And analysts expect this success to continue. Rising earnings estimates have made LRN a Zacks Rank #1 (Strong Buy). Even with topline growth of 47% in its most recent quarter, the company still trades at 16x forward earnings. With net margins moving higher and growth expected to continue, Brian wouldn’t be surprised if LRN runs to $50 before the end of the year. Read the complete commentary for more on this new addition.

ETF Investor: With $55 billion earmarked for water in the infrastructure bill, Neena saw a good time to invest in this “precious commodity with a limited supply”. On Wednesday, the editor added Invesco Water Resources ETF (PHO), which is the most popular water ETF with $1.97 billion in assets and a reasonable expense ratio of 60 basis points. Needless to say, PHO invests in companies focused on conserving and purifying water. The editor also decided to sell the Global X Telemedicine & Digital Health ETF (EDOC) for a slight loss after lagging in the portfolio for a while. Read the full write-up for more.

Commodity Innovators: Three names were added on this busy Wednesday, including two from agriculture and one from energy. Lindsay Corp. (LNN) is a Zacks Rank #2 (Buy) that’s focused on water management and road infrastructure, but it’s the former business that Jeremy is most interested in. The irrigation segment helped the company post a 32% earnings beat most recently and has the editor thinking of new highs before the end of the year. Speaking of crops, the portfolio also picked up Teucrium Corn ETF (CORN) because corn futures are showing resilience under the 200-day and should be strong heading into winter. Finally, it may be weird to think about the colder months during a heatwave, but natural gas has been soaring and may hit highs set back in 2018. The editor added exposure through ProShares Ultra Bloomberg Natural Gas (BOIL), which moves 2X the daily move of natural gas. LNN and CORN are seen as long terms, while BOIL is a short term. Read the full write-up for more.

Surprise Trader: This earnings season has seen several strong retail reports, including DICK’S Sporting Goods (DKS) today. Dave is feeling much more comfortable in the space and added Abercrombie & Fitch (ANF) on Wednesday. This Zacks Rank #1 (Strong Buy) apparel company reports before the bell tomorrow. It topped the Zacks Consensus Estimate in each of the last four quarters and has a positive Earnings ESP of 4.93% for tomorrow’s release. ANF was added today with a 12.5% allocation, while Tapestry (TPR) was sold. The complete commentary has more on today’s action. By the way, DKS was the best performer among all ZU names on Wednesday by climbing 13.3% after a strong second-quarter report.  

TAZR Trader: The portfolio took advantage of some pullbacks and added more to Square (SQ) and Advanced Micro Devices (AMD) on Wednesday. SQ is a “monster of fintech” that’s trading at just 6 times sales expected to grow 98% this year. And its expected to top $21 billion next year. AMD is still undervalued compared to NVIDIA (NVDA) and should be able ride the coattails of that graphics chipmaker as investors scramble to buy it. AMD is up 33.7% in the portfolio since being added in June, while SQ rose 31.4% since March. (By the way, NVDA is the portfolio’s biggest winner at the moment with an 84.8% surge since March 2020.) Kevin also sold ProShares UltraPro Short QQQ ETF (SQQQ) today. Read the full write-up for more on all of today’s moves.

Headline Trader: "Money managers scampered out of fixed-income and into reopening stocks, causing yields to breakout. At the same time, capital is flowing back into recovery plays in travel & leisure, banks, energy, and industrials, which had experienced soft performance in the past few summer months.

"This trend has been playing out since the beginning of the week, as market participants position for the awaited monetary tightening policy change, which some believe could occur as soon as Friday.

"I don't see an asset paring plan being disclosed in Friday's virtual post-Jackson Hole press conference. Just the fact that this over 4-decade old economic tradition is still being held virtually is evidence that the pandemic still impacts our society. I surmise a tapering timeline to be laid out in next month's FOMC meeting (Sept. 21-22), following what should be another healthy monthly jobs report for August. The Fed's asset purchases should slow before the year is up."
-- Dan Laboe

All the Best,

Jim Giaquinto

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