Stocks Down More Than 4% This Week

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The week started so well on Monday with a more than 1% advance following Fed Chair Jerome Powell’s “just below neutral” speech on Nov 28 and a 90-day delay in further tariffs from the G-20. But that was all the good news for stocks. When the closing bell rang on Friday, each of the major indices were down by 4.5% or more for the week.

The NASDAQ tumbled 3.05% (or 219 points) today to 6969.25 with all FAANGs solidly in the red. The Dow slipped 2.24% (or 558 points) to 24,388.95, while the S&P was off 2.33% to 2633.08.

The economy added 155,000 jobs in November, which was below expectations of around 200,000. The unemployment rate held steady at 3.7%. So the report wasn’t “too hot” and, therefore, might help convince the Fed to slow further rate hikes next year. On the other hand, it feeds into growing concerns that the economy is slowing down.

Meanwhile, optimism from last weekend’s meeting between President Trump and China President Xi didn’t last long at all. The 90-day ceasefire on additional tariffs was great, but that’s not a lot of time to negotiate a significant deal and specifics since the meeting have been scarce.

And then came news that Huawei Technologies CFO Meng Wanzhou was arrested in Canada for allegedly violating sanctions on Iran. The arrest was made at the request of the U.S., and the market is concerned that this will complicate the relationship.

What a disappointing week. We got good news on the trade and interest rate fronts, and yet stocks couldn’t take advantage of it. Despite the strong economy, the market is way more nervous than usual and feeling pretty gloomy about the future right now. It’s going to take more than just talk about a trade deal or dovish speeches to break us out of this malaise. Let’s hope it comes soon…

Today’s Portfolio Highlights:

Insider Trader: Energy insiders are buying shares of their own companies in epic proportions lately as the industry has been selling off. Just last week, Tracey bought Matador (MTDR) in the largest cluster buy she had ever seen (and more insiders have bought since). And today, the editor noticed another huge cluster buy that rivals MTDR. From November 5 through December 4, Encana (ECA) saw 13 different insiders pick up shares, including the CEO, the CFO, the COO, the General Council, a few VPs and several directors. Shares of this mid-cap Canadian E&P have plunged 46% in 3 months and 25% in the past month. Tracey finds this selloff to be “absurd”…and so do A LOT of insiders. She put the portfolio’s remaining cash into ECA, which comes to about 8%. Read the complete commentary for a lot more on this cluster buy.

Momentum Trader: Last month, Radware (RDWR) reported its fifth straight positive surprise when earnings per share of 15 cents beat the Zacks Consensus Estimate by more than 36%. This Zacks Rank #2 (Buy) now has a four-quarter average surprise of more than 23%. Looking forward, Dave thinks Zacks Style Scores of “A” for Growth and “B” for Momentum is putting this cybersecurity company in a good position for the future. It’s also part of a space in the top 9% of the Zacks Industry Rank. The editor used the pullback today to add RDWR with a 12.5% allocation. Read the full write-up for more.

Value Investor: Corrections may be tough, but they can open up tons of opportunities for value investors. That’s why Tracey added three positions on Friday. The names below each have solid fundamentals but are cheap after all these selloffs:

• Synchrony Financial (SYF): a Zacks Rank #2 (Buy) credit card issuer that’s down 34% year-to-date

• Lennar (LEN): a Zacks Rank #3 (Hold) homebuilder that specializes in first-time buyers and has slipped 34% year-to-date

• Kemet (KEM): a Zacks Rank #1 (Strong Buy) small-cap maker of capacitors that just reported a solid fiscal second quarter, but is down 20% year-to-date

Read the complete commentary for a lot more on all of today’s buys, especially specifics on their value characteristics.

Have a Great Weekend,

Jim Giaquinto

Recommendations from Zacks’ Private Portfolios:

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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