Stocks Jump on Huawei Delay

It turns out that those restrictions against Chinese telecom giant Huawei don’t have to go into effect right now!

The Commerce Department decided to delay the action for 90 days, which will help maintain existing networks and handset updates.

It also helped the market break out of its two-day slump with a broad-based rally on Tuesday.

The NASDAQ had been leading the way lower of late, but tech bounced back today. The index advanced 1.08% (or about 83 points) to 7785.72.

The performance recouped approximately two-thirds of yesterday’s nearly 1.5% plunge when it looked like the U.S. would immediately cut itself off from Huawei.

Meanwhile, the S&P climbed 0.85% to 2864.36 and the Dow rose 0.77% (or nearly 200 points) to 25,877.33.

You’ve probably heard of that old saying that goes something like “if you don’t like the weather, then just wait a few minutes and it’ll change.”

Sounds kind of like the trade situation these days! But we knew that headlines would continue to impact stocks after the talks with China suddenly hit a brick wall earlier this month.

Who knows what tomorrow will bring on this issue?

However, we do know that Wednesday gives us the FOMC minutes from the last meeting. This was the get-together when Fed Chair Jerome Powell and Friends took a rate cut off the table because low inflation could prove to be only “transitory”.

The market considered it a more hawkish tone and dropped on the news.  

The Fed’s dovish turn earlier this year is the biggest reason why we’ve been able to recover from the late 2018 selloff and reach new highs. So even though we won’t be seeing any rate changes, the market will be watching their language (as always) for any hints about future plans.

Today's Portfolio Highlights:

Counterstrike: The recent 25% plunge in YETI Holdings (YETI) is no myth. Despite a better-than-expected quarterly report earlier this month, shares of this Zacks Rank #1 (Strong Buy) outdoor & recreation retailer have taken a header. However, Jeremy thinks it’s dropped way too much, especially as we move into the summer months when a high-quality cooler and some backpacks could really come in handy. He added YETI on Tuesday with a 9% allocation.

On the other end of the spectrum, the editor also decided to short sell Atlassian Corp. (TEAM). This provider of team planning & project management software has soared 30% since its quarterly report, despite missing the Zacks Consensus Estimate on the bottom line. Jeremy thinks greed is setting in here and that the stock needs a pullback. Plus, it’s a Zacks Rank #5 (Strong Sell)! He put an allocation of 10% into this short sell. Read the complete commentary for more on today’s moves.

Surprise Trader: A positive morning for the market convinced Dave to make a couple changes on Tuesday. The editor sold Electronic Arts (EA) for a 2.1% return and added computer software company Synopsis (SNPS). This Zacks Rank #2 (Buy) has a positive Earnings ESP of 0.92% for the quarter coming after the bell tomorrow. The company has a good record of beating expectations and topped the Zacks Consensus Estimate by 11.3% last time. SNPS was added on Tuesday with a 12.5% allocation. See the full write-up for more. 

Stocks Under $10: There are two things that Brian Bolan wants from new additions to this portfolio right now: 1) diversity and 2) something that won’t be impacted by the trade conflict with China. The editor found what he was looking for with Zacks Rank #2 (Buy) Century Casino (CNTY). He likes that this company is profitable and that next year’s earnings of 69 cents would mark a huge improvement over this year’s 37 cents. Read more in the full write up. By the way, this portfolio also had the best performer of the day among all ZU names as Lithium Americas (LAC) climbed 12.2%.

Large-Cap Trader: Adding a Chinese company during this trade conflict is about as contrarian as you can get. However, John sees good reasons to buy e-commerce giant Alibaba (BABA) that have nothing to do with an investment philosophy. The company recently reported quarterly results that showed no impact from the U.S./China trade fight. In fact, revenue jumped 51% year over year. Shares of this megacap are now just south of $165, which is a “gift” for a stock like this. The editor added BABA on Tuesday with a 7% allocation. Read the full write-up for more.

Blockchain Innovators: The insurance industry can certainly use blockchain to help take some of the tedium out of all that paperwork. Case in point, Galileo Platforms is looking to “revolutionize the insurance industry” by using blockchain to develop smart contracts, as well as other initiatives. Dave likes the idea, but Galileo isn’t publicly traded. Therefore, he did the next best thing by adding Greenlight Capital (GLRE), a specialist property & casualty reinsurance company. Last September, GLRE made an investment in Galileo. The stock has recently pulled back a bit, giving the editor a good entry point. Read the complete commentary for more.

Zacks Short List: Both of the stocks leaving the portfolio in this week’s adjustment were winners. Agnico Eagle Mines (AEM) and World Wrestling Entertainment (WWE) were short-covered today and brought gains of 7.4% and 6.3%, respectively. The new additions that replaced these names are Chegg (CHGG) and Inphi Corp. (IPHI). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

All the Best,
Jim Giaquinto

Recommendations from Zacks' Private Portfolios:

Believe it or not, this article is not available on the Zacks.com website. The commentary is a partial overview of the daily activity from Zacks' private recommendation services. If you would like to follow our Buy and Sell signals in real time, we've made a special arrangement for readers of this website. Starting today you can see all the recommendations from all of Zacks' portfolios absolutely free for 7 days. Our services cover everything from value stocks and momentum trades to insider buying and positive earnings surprises (which we've predicted with an astonishing 80%+ accuracy). Click here to "test drive" Zacks Ultimate for FREE >>

 
Zacks Investment Research