Now that the evil month of September is done for another year, stocks managed to start October and the fourth quarter with some nice gains of 1% or more. However, the full week was still a loser after all the recent volatility.
It’s almost like the indices suddenly realized this morning that the month had turned, reversing overnight sluggishness and a weak Friday open to finish the session with a real rally. We got some help from news that Merck (MRK, +8.4%) developed a covid pill that could help cut patients’ time in the hospital. But overall, we were due for some bounce back.
The Dow, which plunged by more than 500 points twice this week, recovered 1.43% (or about 482 points) today to 34,326.46, leaving with a weekly loss of 1.4%. The S&P rose 1.15% to 4357.04, while the NASDAQ finally snapped that five-day losing streak with an advance of 0.82% (or around 118 points) to 14,566.70. These indices were down more than 2% and more than 3%, respectively, over the past five days.
Since we’re only one day removed, let’s mention the September results one more time and then try and forget about it. As investors feared, the month was a very difficult one with the NASDAQ off more than 5%, the S&P down nearly 5% and the Dow sliding over 4%.
We’ve received some relief of late from the issues that really hurt stocks, including a short-term appropriations bill that will fund the government through Dec 3 and avert a government shutdown. Furthermore, after wreaking havoc with tech all week, the 10-year closed beneath 1.5% today.
But October won’t be a walk in the park since most of the problems are still very much with us, including rising inflation, a changing monetary policy, the debt ceiling debate and other fun out of Washington like the infrastructure bill. And let’s not forget about Evergrande.
Since it’s the turn of the month, next week at this time we’ll be talking about the Government Employment Situation report. It may be the final straw that gets the Fed talking specifically on when the tapering of asset purchases will begin.
But for now, let’s just be glad that September is over and enjoy the weekend.
Today's Portfolio Highlights:
Headline Trader: You probably haven’t heard of SoFi Technologies (SOFI) yet, but Dan is betting that you will in the near future. The company is a nascent and “revolutionary” fintech innovator that the editor says is “successfully executing on its growth narrative in a way that I have never seen before”. SOFI, which already provides more than 3600 digitally-inclined financially-focused products to nearly 2.6 million customers, is enjoying year-over-year revenue growth as it rushes toward profitability after four straight quarters of positive EBITDA. Following a crazy rally, the stock has finally come down to earth due to a bond issuance and is now right in this portfolio’s wheelhouse. Dan leapt at the chance to add a company with excellent topline visibility that's still cheap, but probably won’t be for long. Read the full write-up for a lot more on this addition. By the way, the service is also getting out of the small triple-leveraged short NASDAQ 1000 (SQQQ) for a 5.9% return to generate more liquidity, though it should be noted that the editor is NOT calling for an end to the market pullback.
Counterstrike: After some very volatile trading last night and this morning, Jeremy thought it was a good idea to “nibble” on a few stocks before the weekend. Therefore, he added a couple names today and got rid of three. The editor added cloud-based enterprise-level software solutions company Workday (NASDAQ:WDAY) and cloud security and compliance solutions company Qualys (NASDAQ:QLYS) with 6% allocations each. These names are seeing support at their 200-day and 50-day MAs. The service also short-covered its “stubborn” position in Twilio (NYSE:TWLO) for a 5.6% return in less than two months, while getting out of the underperforming Sonos (NASDAQ:SONO) and The TJX Cos. (NYSE:TJX) positions. Read more in the full write-up.
Income Investor: "September was chock full of headwind after headwind, like slowing growth, waning fiscal stimulus, supply chain bottlenecks, and less accommodative monetary policies. But with valuations teetering at sky-high levels, the sell-offs we experienced last month were healthy.
"Now, our favorite stocks are at attractive discounts compared to their prices just a few weeks ago. It’s times like these where it’s ultra-important to take advantage and to focus on your long-term investing goals.
"Looking ahead, there can be some swift market sell-offs in October, but it’s usually the start of a better trading period for stocks. According to the Stock Trader’s Almanac, the S&P gains about 0.8% on average this month." -- Maddy Johnson
Have a Great Weekend!
Jim Giaquinto
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