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Stocks Still Angry at the Fed; Drop Another 1.5%+

Jim Giaquinto

The market had 24 hours now to digest the Fed decision… and it still hates what it heard yesterday. The major indices each dropped by more than 1.5% on Thursday as this horrible month of December continues to get worse.

The Dow fell by nearly 2% (or 464.06 points) to 22,859.60, while the NASDAQ slipped 1.63% (or about 108 points) to 6528.41. The S&P is now solidly beneath 2500 after declining 1.58% to 2467.42.

It’s still all about the Fed. The market really wanted them to take this steep correction into account when deciding further rate hikes, but Fed Chair Jerome Powell doesn’t seem as concerned as investors. The Committee sees one fewer increase next year than originally expected, but that obviously wasn’t enough.

Meanwhile, a higher possibility for a government shutdown isn’t helping matters either. The U.S. Senate approved a temporary funding bill to keep everything going until February, but President Trump said today that he would not sign it without funding for a border wall.

Investors, though, are much more anxious about the Fed continuing to raise rates at a time of weakening growth across the globe. Each of the major indices have now dropped more than 3% in the past two sessions since the announcement.

As you’ll see in the highlights section below, a few of the editors decided to take a chance and add positions in preparation for a bounce back. Unfortunately, there was no rebound today as the market’s sentiment continues to be ugly.


Today's Portfolio Highlights:

Counterstrike: The market is way overdue for a relief rally, according to Jeremy. The editor mostly sat on the sidelines while stocks crumbled, but now it’s time to gather some courage and buy while everyone else gives up. On Thursday, he bought the following four names:

• Etsy (ETSY) – a provider of online and offline marketplaces
• Illumina (ILMN) – a provider of DNA sequencing and array-based tech
• RH (RH) – a luxury furniture company
• Splunk (SPLK) – a provider of software solutions

These companies are all fundamentally solid and have reported strong quarters, but the correction has either pulled down shares or limited any improvement. RH is a Zacks Rank #1 (Strong Buy), while the other three are Zacks Rank #2s (Buys). Jeremy is adding each of these names with small, 5% allocations and plans to buy more during better times. The complete commentary has specifics on each of these buys with charts.

TAZR Trader: With major technical damage running into a hawkish Fed, Kevin decided before the open this morning to drop all bullish biases and get net short with an initial target of S&P 2400. And with little potential bullish relief in sight until Q4 economic data and earnings, institutions will likely remain in "sell the rallies" mode. So the editor added Direxion Daily S&P 500 Bear 3X Shares (SPXS) on Thursday. Read the full write-up for more on Kevin’s outlook and todays’ moves, which also include a couple of sells.

Insider Trader: Lots of changes in the portfolio today. As Tracey said yesterday, this deeper-than-originally-expected correction demands a new strategy for the service. Therefore, she sold six names that have been getting killed and added a couple mid- to large-cap positions that should perform better in tough times. Here are the new buys:

PVH (PVH): Insiders at this apparel retail giant rarely ever buy their own shares, so it really caught Tracey’s attention when the CEO and a director recently made moves. The CEO’s play was especially bullish since it was likely a “confidence buy” meant to send a signal that its 35% drop year-to-date is way overdone.

Chemours (CC): This specialty chemical company was spun off from DuPont in 2015 and the insiders were rewarded handsomely. So they don’t often see the need for insider buys. And yet, earlier this month a director bought 10,000 shares despite the stock being down nearly 50% so far this year.

Both names were added with 10% allocations. After today’s moves, the portfolio has plenty of cash on hand to continue adding as we move into 2019. Read the full write-up for a lot more on Tracey’s strategy and today’s moves.

All the Best,
Jim Giaquinto

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