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Rising Treasury yields finally took a significant bite out of the market on Tuesday, sending two of the major indices plunging by over 2% and snapping the Dow’s four-day winning streak.
Well, we could feel this coming. Tech stocks were under pressure yesterday for the same reason, but the 10-year moving past 1.5% opened the floodgates today. As expected, the NASDAQ got the worst of it and dropped 2.83% (or about 423 points) to 14,546.68. That’s one of the worst slides of 2021.
The FAANGs got shellacked with Facebook (FB) and Alphabet (GOOG) each down by more than 3%, while Apple (AAPL) and Amazon (AMZN) dropped over 2%. Microsoft (MSFT) also got roughed up to the tune of 3.6%.
Meanwhile, the S&P, which has significant exposure to tech in its own right, was off 2.04% to 4352.63. The Dow wasn’t spared from the Tuesday tumble as it dipped 1.63% (or nearly 570 points) to 34,299.99, which ends its four-day winning run that began last Wednesday with the Fed statement.
By the way, that Fed statement last week was when rates began moving higher, as Chair Jerome Powell signaled that tapering of asset purchases could begin soon. Perhaps before the end of year. Investors took it in stride until that 10-year started soaring.
And there wasn’t much else to take the market’s mind off of the rising rates. Instead, we got a disappointing consumer confidence report for September, as the 109.3 print fell short of the previous month and expectations around 115. This marked a third straight monthly decline.
Furthermore, it looks like Washington may go right down to the wire to fund the government… if they get it done at all. A bill that would have kept things moving through early December and also raise the debt ceiling was blocked last night. Congress has until the end of the month, which means Thursday, to fund the government and avert a shutdown in October.
Today’s Portfolio Highlights:
Stocks Under $10: The portfolio is now fully invested after today’s addition of natural and organic foods company SunOpta (STKL), which easily topped the Zacks Consensus Estimate in three of the last four quarters. Rising earnings estimates turned this company into a Zacks Rank #2 (Buy). Brian thinks a rebound is near for STKL after the stock fell to below $9 from $13 in June. Once the market gets back to rallying, so too should STKL. The editor wants to be on board for that bounce back. Read the full write-up for a lot more on this new addition.
ETF Investor: Rates have been on the rise since the Fed statement last week, leaving the regional banks in a great position to capitalize. The space gets most of its earnings from the interest rate spread. Therefore, Neena added the SPDR S&P Regional Banking ETF (KRE) on Tuesday, which is the largest product in a space with over $4.9 billion in assets. It also has an expense ratio of 35 basis points. The editor will wait for a better day in the market to sell one of the service’s holdings. Read the full write-up for more.
Income Investor: It’s always exciting to mix things up in your portfolio, but its all the more satisfying when you can also cash in several double-digit winners along the way. Such was the case on Tuesday when Maddy sold Broadcom (AVGO) for 55.8%, SPDR S&P Dividend ETF (SDY) for 24.6% and PepsiCo (PEP) for 13%.
The editor filled the vacuum with a couple Zacks Rank #1s (Strong Buys) from disparate spaces. HP Inc. (HPQ) sells printers, laptops and desktop PCs. The recent third-quarter report was nothing to write home about, but Maddy really likes the rising earnings estimates and its “enticing” valuation. And don’t forget that HPQ is one of the most trusted names in PCs at a time when the mobile workplace is soaring. Meanwhile, Hanesbrands (HBI) is also a trusted name… but in the apparel industry. The company’s Full Potential plan is finally paying off with solid second-quarter results that also included a raised outlook for the future. The editor is most impressed with HBI’s market share gains, the success of its Champion brand, its dividend yield of 3.2% and the valuation under 11x forward earnings. Read the full write-up for more on all these moves.
Zacks Short Sell List: The portfolio cashed in a double-digit winner as part of this week’s adjustment. The three stocks that were short-covered on Tuesday included:
• Las Vegas Sands (LVS, +28.2%)
• JD.com (JD, +4.4%)
• Huazhu Group (HTHT, +0.7%)
The new buys that filled these spots were:
• JOYY Inc. (YY)
• Overstock.com (OSTK)
• WillScot Mobile Mini Holdings (WSC)
Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short Sell List Trader Guide. By the way, this service had a couple top performers on Tuesday as the shorts in Certara (CERT) and AppLovin (APP) rose 7.3% and 5.2%, respectively.
Have a Good Evening,
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