S&P Snaps 3-Day Slide Despite Late Selloff

Stocks took a turn for the worse in the final hour of trading on Wednesday, but the S&P still managed to end its losing streak in the final full session of this holiday-shortened week.

The stimulus drama isn’t quite done yet. President Trump doesn’t like the $900 billion bill that Congress passed this week, calling it “wasteful” and suggesting that payments to Americans should be raised as high as $2000 instead of $600.

He didn’t exactly threaten to veto the measure… but it hasn’t been signed either. And it comes at about the same time that he did veto the $740 billion National Defense Authorization Act.

The market didn’t panic at this news. The President may still sign the bill and there’s a strong chance it would be overridden in Congress if he does veto it. However, it could cause a delay in the funds and was likely part of the reason for the late-day selloff in the indices.

The S&P barely snapped its three-day slide with a gain of 0.07% to 3690.01. The Dow recovered a little more than half of yesterday’s drop by rising 0.38% (or about 115 points) to 30,129.83.

However, both indices were much higher earlier in the session.

The NASDAQ, which reached a new record yesterday and was the only index in the green, played the laggard on Wednesday by slipping 0.29% (or about 37 points) to 12,771.11.

This week’s jobless claims came out a day earlier than usual due to tomorrow being Christmas Eve, and the result was mixed. On the one hand, the 803,000 claims were better than last week and expectations.

But on the other hand, this was the third straight week with claims above 800K. The data had spent a while in the 700Ks and came pretty close to breaking into the 600Ks, but then the coronavirus caught a second wind and the economic recovery slowed.

All the more reason to get that stimulus deal done...

Today's Portfolio Highlights:

Large-Cap Trader: Nobody expected the S&P to trade at 3,700 this year, but that’s where we are in the waning days of 2020. John thinks the risks are to the downside at the moment, so he made quite a dramatic move on Wednesday by selling the portfolio’s top eight names. Today he sold:

• Howmet Aerospace (HWM (MX:HWM), +112.4%)
• Alphabet (NASDAQ:GOOGL, +58.2%)
• MasTec (NYSE:MTZ, +41.7%)
• Lowe’s Companies (LOW, +37.2%)
• Applied Materials (NASDAQ:AMAT, +33.4%)
• Mastercard (NYSE:MA, +24.6%)
• Halliburton (NYSE:HAL, +22.4%)
• KLA Corp. (KLAC, +21.05%)

Now if there’s a pullback, the service can be opportunistic and draw out of cash to buy. See John’s complete commentary for more on this big move.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Home Run Investor: The portfolio has plenty of exposure to the building products space, so Brian can be a little impatient when a company gets stuck in a trading range like Arcosa (NYSE:ACA). Therefore, he sold the stock on Wednesday for a 10.2% return in a little over two months. The new buy is AudioCodes (AUDC), a vendor of advanced voice networking and media process solutions for the digital workplace. The company has beaten the Zacks Consensus Estimate in the past two quarters, while rising earnings estimates have made it a Zacks Rank #2 (Buy). Furthermore, it’s got a good valuation and margins are improving. Shares have pulled back from its recent high, and the editor plans to be on board when it retests. Read the full write-up for more on this new addition.

Options Trader: “As you know, Congress passed a stimulus bill earlier this week. But on Tuesday evening, the President expressed his unhappiness with the bill’s $600 check and asked Congress to increase it to $2,000 ($4,000 for a couple), along with getting ‘rid of the wasteful and unnecessary items’ in the bill.

“Interestingly, the market was mostly higher in spite of this uncertainty. And it’s likely because there appears to be enough votes to override a veto if that’s where it’s headed.

“So the likely worst case scenario is the bill goes thru as is. Best case is Congress increases the amount and the checks that go out are even larger. Either way, there appears to be little downside regarding this bill right now. That could always change. But that seemed to be the feeling today.

“Both the Nasdaq and the Russell are poised for another up week. And it won’t take much for the Dow and the S&P to do the same.” – Kevin Matras

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). Zacks Investment Research

Written By: Zacks Investment Research