Monday, May 15, 2017

Retail Spoils New Highs

Stocks looked all set to bust out to new highs at the closing bell on Wednesday (the S&P was only 0.37 of a point away), but weak results from some big department stores ruined it. By the end of Friday, the S&P had slipped 0.4% for the week, while the Dow was off 0.5%. This was their first weekly losses in about a month. The NASDAQ, however, managed a gain of 0.3% for the week.

For today’s session, the S&P was down 0.15% to 2390.9, the Dow was off 0.11% to 20,896.6 and the NASDAQ advanced 0.09% to 6,121.2. 

Retail sales, in general, improved by 0.4% in April after a rough start to the year, but it still missed expectations. Most of the retail attention this week centered on soft results and big share declines for brick-and-mortar department stores like Nordstrom, J.C. Penney and Macy’s. So the U.S. consumer, which makes up most of our economy, actually spent more money last month than in the previous three, but the traditional spots appear to be falling further behind. The market must have been nervous being so close to new highs, because this was enough of a reason to pull back.

Today’s Portfolio Highlights:

Healthcare Innovators: Kevin searched for traditional, large-cap pharma names with long-term fundamentals and short-term timing opportunities. The winner was Eli Lilly (LLY), the $90 billion pharma giant with eight new product launches. The editor thinks the company has the best upside potential over the next year, as management has done a good job with its goal to achieve 20 product launches between 2014 and 2023. Kevin is especially impressed with the strength of its diabetes franchise. The full commentary has a lot more specifics on this new buy and a review of the complete portfolio.

Stocks Under $10: The optical networking space is still really hot, so Brian Bolan decided to add a stock from this area as partial replacement for two sells. The portfolio got out of PCTI and CLF today, and added Oclaro (OCLR). The editor had to broaden his parameters a bit to buy this Zacks Rank #3, but he’s getting a company that recently beat earnings and has a Zacks Style Score of A for Growth. Shares have been moving higher of late as OCLR gets back to $9 and beyond. Brian will have more on this new pick on Tuesday, along with another buy to fully swap out today’s sells.

Income Investor: The economy and earnings growth have rebounded in Europe, so Neena wanted to add some international exposure to the portfolio. The best way to do that is through European stocks, which are cheaper than their U.S. counterparts and are better poised to benefit from the global economy. As announced yesterday, the editor added Vanguard MSCI Europe ETF (VGK) on Friday, which is the cheapest and most popular ETF for broad, diversified exposure to developed European countries. It has a nice dividend yield of 3.07%. Read the full write-up for more.

Options Trader: “But all of the major indexes remain either at or near their all-time highs. And they are all within striking distance of breaking out to new all-time highs any day.

“As I mentioned yesterday, everybody was pretty excited this week in anticipation of breaking thru 2,400. But the market often has a way of not doing what everybody is expecting. And that was shown to be true again today/this week.

“But not for long, as I think that level will fall soon. And then 2,500. And then 2,600 by year’s end. Just not today/this week.” — Kevin Matras

Have a Great Weekend,

Jim Giaquinto


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May 15, 2017 at 10:35AM

from Jim Giaquinto