Thursday, December 8, 2022

Dow, S&P See First Weekly Declines of November


The market didn’t receive the Friday rally that was needed to sustain November’s upward momentum, as concerns over rising coronavirus cases led to weekly declines for two of the major indices.

The Dow slipped 0.75% (or nearly 220 points) to 29,263.48, while the S&P declined 0.68% to 3557.54.

These indices saw their first weekly pullbacks of the month, but only by approximately 0.7% and 0.8% respectively. However, they’re still sharply higher over the past three weeks.

The NASDAQ was off 0.42% (or nearly 50 points) to 11,854.97, but advanced 0.2% for the week as tech became a safety play again with Covid cases on the rise.

We keep getting encouraging vaccine news, such as Pfizer (NYSE:) and partner BioNTech applying for emergency use authorization with the FDA.

Earlier this week, the duo announced that Phase 3 trials showed its vaccine was even more effective than originally thought at approximately 95%, compared to ‘more than’ 90% as first announced on November 9.

But while last week was all about the future, this week was mostly about the here and now.

And its not just Covid’s resurgence that is concerning investors (though that is the epicenter of everything). It’s also the dilly-dallying on a stimulus package and now this disagreement between the Treasury and Fed on continuing some emergency programs.

Sentiment has shifted quite a bit since various places have begun reinstating restrictions, including huge population centers in New York, California and Illinois. Such regression is what the market feared the most.

But let’s not forget that we’re in a much better place than we were when November began, and the market has responded accordingly. The Dow is still up more than 10% this month, while the other indices have each climbed over 8%.

And here’s something to keep in mind from Dave in today’s Surprise Trader:

“There are a few trends developing in this market which tell me to continue my bullish tilt. The first, is the consistent rebound in the most beat down COVID names. Another trend is terrible COVID news being mostly overshadowed by positive vaccine progress.

“This is the main event and the tug-of-war where most of the market’s energy is being exhausted. Positive vaccine news is leading to larger absolute moves than the negative COVID news. The constant stream of money into the aforementioned downtrodden names only exacerbates this point.”

Today’s Portfolio Highlights:

Blockchain Innovators: For his second buy of the week, Dave picked up a company that’s well off its highs despite rising earnings estimates. That’s a divergence that “typically works out” since the stock has plenty of running room ahead. The new addition is A10 Networks (NYSE:), which provides software-based application networking solutions. The company has beaten the Zacks Consensus Estimate for several quarters in a row, while increasing estimates has made the stock a Zacks Rank #2 (Buy). Make sure to read the complete commentary for more on this service’s addition of ATEN. In other news, this portfolio had TWO of the top performers today with Exp World Holdings (EXPI, +6.8%) and Intellicheck Mobilisa (IDN, +6.1%).

Insider Trader: There isn’t much insider activity amid all this uncertainty right now, but Tracey found a stock going against the grain. Arlo Technologies (NYSE:) is a cloud infrastructure & mobile app company. More specifically, it’s a smart home technology name that makes things like video doorbells and spotlight cameras. Earlier this month, it reported a strong third quarter, which included adding a record 58,000 paid accounts. Earnings estimates are moving higher, but shares have been going the other way recently. It’s down 13.4% in the past three months. However, the insiders aren’t concerned. A director bought shares earlier this week, and the CEO picked up 21,000 shares last week. Tracey considers the CEO’s move to be a “confidence buy” and she followed suit today by added ARLO to the service with an 8% allocation. Read the complete commentary for a lot more on this new addition.

Options Trader: “The breaking out of small-cap stocks has long been considered a powerful bullish signal. And after their surge to new all-time record highs the other week (a feat that was two years in the making), and their push to even higher highs last week, that signals a big move ahead.

“As you know, the rising case counts remain a concern, not just health-wise, but for the impact that more restrictions could impose on the economy.

“But the positive vaccine and therapeutics news has been underpinning stocks. And that’s because these breakthroughs are being hailed as the catalysts that will finally let the world get back to normal.

“And that should send stocks skyrocketing.” — Kevin Matras

Have a Great Weekend!
Jim Giaquinto

Recommendations from Zacks’ Private Portfolios:

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