Stocks Drop as Stimulus Negotiations Called Off

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Stocks took a header late in Tuesday’s session as it appeared a stimulus package wasn’t going to happen before the election. 

Basically, President Trump called it off. A day after returning home from the hospital for treatment of covid, he directed Republicans to stop negotiations on a stimulus deal until after the election.

The market wasn’t really confident that Speaker Pelosi and Treasury Secretary Mnuchin would suddenly have a breakthrough and reach a deal. But it was hopeful! As long as they were talking, it seemed possible.

The good news is that the election is less than a month away, and a stimulus measure will be a major issue for whoever wins.

The American people have been hanging on for weeks now since the original aid expired, so let’s hope they can keep treading water a little while longer.

Just a few hours before the President’s tweet, Fed Chair Jerome Powell was mentioning the need for more help out of Capitol Hill during virtual comments at the National Association for Business Economics. He said the risk of overdoing a stimulus is smaller than doing too little. 

The major indices looked like they might finish in the green again on Tuesday, but the late pullback sent them all lower by well over 1%.

The NASDAQ dropped 1.57% (or about 177 points) to 11,154.60. Meanwhile, the S&P dipped 1.4% to 3360.97, while the Dow was off 1.34% (or around 375 points) to 27,772.76.

The major indices had a strong beginning to the week on Monday as the President returned to the White House after a precautionary weekend stay at Walter Reed for his covid infection.

The NASDAQ jumped more than 2.3% yesterday, while the Dow and S&P each rose over 1.5%. 

Today’s Portfolio Highlights:

Stocks Under $10: This may not seem like a good time to be in the business of selling surplus items for businesses and the government, but Brian thinks that Liquidity Services (LQDT) is turning the corner. This auction site trounced the Zacks Consensus Estimate in the past two quarters, including a surprise of 133% most recently! As a result, earnings estimates moved higher. The editor thinks the market has been too sour on LQDT, leaving the stock poised for an uptrend as pandemic shortages make its services more important moving forward. Read the full write-up for a lot more on this new addition.

Surprise Trader: Over the past two years, the October report from Commercial Metals (CMC) led to sharp share increases for this steel company. And it’s about that time again! The next report is scheduled before the bell on Thursday October 15. CMC has beaten for six straight quarters now, including a surprise of approximately 110% last time. The company seems set to continue that streak with an Earnings ESP of 1.54% for the upcoming report. Dave added CMC on Tuesday with a 12.5% allocation, while also selling Ambarella (AMBA) for an 11.9% return in less than six weeks. See the complete commentary for more on today’s moves.

TAZR Trader: This portfolio easily had the top mover of the day among all ZU names as Alteryx (AYX) surged 28.2%, which was more than three times better than the next best performer. This data analytics software platform raised its third quarter guidance to between $126 million and $128 million, which was more than analyst expectations. It also appointed a new CEO. Kevin added AYX back on August 7.

Counterstrike: With a presidential election and a new earnings season on the horizon, Jeremy decided to raise some cash on Tuesday. He sold all or part of four positions, which included cashing in three double-digit returns! The moves included:

Crocs (CROX) – sold half for a 29% return since addition on Aug 3
Lam Research (LRCX) – sold all for a 12.3% return since Sep 8
Zendesk (ZEN) – sold half for a 10.8% return since Aug 31
Dropbox (DBX) – sold all for slight loss

See the full write-up for more on today’s moves.

Zacks Short List: This week’s adjustment replaced half of the portfolio. The positions that were short-covered on Tuesday were:

China Lodging Group (HTHT)
Sysco (SYY)
Burlington Stores (BURL)
Performance Food Group (PFGC)
The Trade Desk (TTD)

The new buys that filled these open spots included:

Alcon (ALC)
Canada Goose (GOOS)
Ecolab (ECL)
AZEK Company (AZEK)
XPO Logistics (XPO)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Insider Trader: “It was a crazy session as stocks were in the green for most of the day until President Trump tweeted out that he was instructing Mnuchin to end the negotiations with the Democrats over the next aid package until after the election.

“All the major indexes immediately dropped on the Tweet and finished in the red for the day.

“It could have been much worse, to be honest. But will we continue to see weakness for the rest of this week as the news sinks in?” — Tracey Ryniec

Have a Great Evening,
Jim Giaquinto

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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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