Stocks Enjoy First 5-Day Rally in Months

It would have been completely understandable for the market to pull back a bit on Thursday after four consecutive days in the green. And it appeared the major indices would do just that as the session opened solidly in the red. But despite all the challenges that still linger in the air, stocks remained confident enough to push this winning streak to a fifth straight day.

The Dow ended higher by 0.51% (or more than 122 points) to 24,001.92, while the S&P advanced 0.45% to 2596.64. The NASDAQ was up 0.42% to 6986.07.

We haven’t seen a positive run like this since before the market went off the rails in October 2018. Stocks have been feeling pretty good since last Friday’s strong jobs report and “patient” Fed comments. In fact, each of the major indices have now recovered more than 10% from the Christmas Eve lows…though they still have a lot of ground to recover to get back to new highs.

The market remains rather optimistic about the mid-level trade negotiations between the U.S. and China that ended yesterday. However, it was disappointing that President Trump cancelled his trip to the World Economic Forum in Davos due to the government shutdown, which will reach its third full week tomorrow. An official meeting wasn’t scheduled between the President and China officials, but the market still hoped to see bigwigs on both sides sit down and talk even more about trade. Unfortunately, it doesn’t look like that’s going to happen.

One of the bigger stories on Thursday was the more than 17% plunge in Macy’s stock after the department store staple cut its full year sales forecast after a soft holiday season. The retail sector declined on the news, though the market as a whole still managed to move higher. However, it’s a reminder that we are getting close to earnings season and that the growth rate this time is expected to be less than in the previous three quarters. A few of the big banks will kick things off next week.

The rally may not have taken a break on Thursday, but the editors sure did. After a few days of heavy portfolio activity, there weren’t many buys and sells today. However, they still had a lot to talk about.

Today's Portfolio Highlights: 

Stocks Under $ 10: When Brian Bolan added USA Technologies (USAT) on Tuesday, he was counting on some squeezing of its short position of 11%. It looks like we saw some of that on Thursday with the stock rising 6.4% and becoming the top performer of the day among all ZU names. The stock is now at $ 5.32. Brian thinks it can get back to its mid-October level of $ 6.50 rather soon. 

Counterstrike: "Markets grinded higher once again after an attempted sell off failed and the S&P gravitated to 2600. We couldn’t print the figure today, but I would assume that it will come in play in the futures tonight.

"Seems like the S&P wants to drift above 2600. If we get to the 2620-30 area, I will put on some shorts like VXX, SDOW and SQQQ. I might also target individual stocks as well. In no way do I think we go straight up to all-time highs, so I think it will be prudent to take some profits above the 2600 level.

"In addition, I could see 2019 being an inside year. This means that we will trade between the highs and lows of last year. That trading range is huge, over 600 handles, so trading will be good. However, at the moment I don’t see the S&P going above 2950 or below 2300 this year." –Jeremy Mullin

Income Investor: "Stocks are on their longest winning streak in months, continuing a rally from the Christmas Eve lows that has plenty of last year’s trendy growth and momentum stocks back on Wall Street’s menu.

"We haven’t quite reached the levels that might present technical resistance, but it’s clear that last Friday’s jobs report and the trade talks in Beijing this week have investors feeling better.

"The market is off to the races on Q4 earnings season next week, with the big banks hitting Monday, Tuesday, and Wednesday as well as Netflix and others reporting on Thursday. We’ve seen the likes of American Airlines, Apple, and some retailers issuing guidance cuts or sluggish early results already, which has raised some questions about whether this earnings season could be weak.

"We’ll keep an eye on what happens next week to see if we can spot any clues on what’s to come from the reports in our portfolio!" — Ryan McQueeney, who added MPLX LP (MPLX) and Dominion Energy (D) to the portfolio yesterday.

All the Best,
Jim Giaquinto

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