Thursday, March 30, 2023

New Highs for All Major Indices Despite Soft Jobs Data


Even a disappointing jobs report couldn’t keep this market from rallying out a strong week and expanding its record-setting run.

The S&P rose 0.88% on Friday to 3699.12, marking its third closing high in the past four days. The NASDAQ has now made history in back-to-back sessions with an advance of 0.70% (or about 87 points) to 12,464.23.

But this time the Dow joined in on all the fun. The index jumped 0.83% (or about 248 points) to 30,218.26. In addition to being a new record, it’s also the second close ever above 30K. The first time was on Tuesday, November 24.

The NASDAQ finished the week higher by 2.1%, while the S&P rose 1.7% and the Dow advanced 1%.

The market accomplished all this despite a pretty disheartening jobs report. The Government Employment Situation said the economy added 245,000 jobs in November, which significantly missed expectations of around 450K.

It’s quite a change from the previous report, which stated more than 600K jobs were added in October. This sluggishness is seen as a sign that the economic recovery is stalling a bit amid a rise in coronavirus cases.

However, the unemployment rate did decline to 6.7% from 6.9%.

Many investors see this as one of those “bad news is good news” scenarios. The idea is that we’re more likely to get a stimulus deal after a bad jobs report.

Who knows? It’s still hard to grasp that the expiration of the previous benefits months ago and the sharp increase in cases more recently didn’t provide enough of a catalyst to get something done.

But something’s got to give sooner or later. Getting back to normal will take most of next year even in the smoothest of scenarios. So maybe this lackluster report is the final straw.

For now though, the market started the final month of one of the hardest years in history with new record highs. Not bad!

Today’s Portfolio Highlights:

Value Investor: The agriculture industry’s turnaround has just begun, so that’s where Tracey went for today’s addition. But she didn’t go with the obvious choice of Deere (NYSE:). Instead, the portfolio picked up AGCO (AGCO), an often overlooked competitor that makes tractors, combines and other agricultural technologies. This Zacks Rank #1 (Strong Buy) is more reasonably priced with earnings that are expected to grow 15.5% this year and 16.2% next year. AGCO had a great third quarter with earnings that beat expectations and sales that improved more than 18%. Shares are up 20% this year, but Tracey thinks there’s more upside as the agriculture rebound is “in its first innings”. Read the full write-up for more, including AGCO’s specific value characteristics.

Technology Innovators: The portfolio swapped out a position on Friday by selling 2U (NASDAQ:) for a more than 60% return in just over eight months and then immediately filling the spot by adding Cornerstone OnDemand (CSOD). This new buy is a software-as-a-service name that focuses on learning management, enterprise social networking and performance management. It topped the Zacks Consensus Estimate in three of the past four quarters, including hefty surprises of 53% and then 142% in the past two reports. Rising earnings estimates have given CSOD a Zacks Rank #2 (Buy) status. The valuation is a bit “stiff”, but Brian likes its 37% topline growth, high demand and rising margins. See the full write-up for more on today’s action.

Surprise Trader: One week from today, Construction Partners (NASDAQ:) will be reporting its quarterly results. Last time, this infrastructure and road construction company beat by 25% And now it has a positive Earnings ESP of 16.02% for the quarter coming before the bell on Friday, December 11. Dave added ROAD on Friday with a 12.5% allocation, while also selling Tilly’s (TLYS). Read the full write-up for more.

Stocks Under $10: Shares of toymaker Funko (NASDAQ:) have gone on quite a ride the past two days thanks to dueling brokerage ratings. Yesterday, the stock dipped double digits after a firm lowered its rating. However, shares made up for that loss and then some on Friday thanks to another firm raising its rating. FNKO soared over 28% today and easily became the top performer of the day among all ZU names. The stock is now up nearly 88% in the portfolio since being added in July, which makes it the #2 position at the moment. By the way, this portfolio also had the next biggest winner as Rayonier Advanced Materials (NYSE:) jumped 12.9%.

Have a Great Weekend!
Jim Giaquinto

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