Programming Note: John Blank was on CNBC this afternoon discussing today’s market selloff and the role that earnings season has played. Check out his appearance by clicking here.
Well, investors had been waiting – even hoping – for this market to pull back, and today they certainly got their wish. We haven’t seen a rush to the exits like this one in a long time. The Dow collapsed 2.5% (or about 665 points) to 25,521, while the S&P dropped 2.1% to 2762.1. The NASDAQ declined nearly 2% to 7241.
Needless to say, the four-week winning streak is gone…long gone. The Dow and S&P each slipped by about 4%, while the NASDAQ dropped a little more than 3.5% this week. Now the major indices have a lot of work to do to keep their monthly winning streak alive.
One of the market’s big problems today was a robust jobs report. Yep, it’s the old “good news is bad news” play. The Employment Situation report said the economy added 200,000 jobs last month, which blew past expectations while wage gain was the most in over 8 years. If the market was concerned about rising rates before (and it was), these strong numbers surely didn’t make them feel any better.
In a bull market that is now more than 8 years old, it’s understandable that some investors-come-lately would be frightened by today’s plunge. However, those who have been around the block a time or two understand the opportunity that the market just presented.
“No matter what happens, we need to be buyers next week. We finally got our sell off we have patiently waited for,” said Jeremy in Counterstrike .
In the portfolios, Value Investor and Home Run Investor each banked double-digit winners, while the latter also bought a company that just reported a strong quarter. Technology Innovators picked up a name from the “big data” space. Read all about these moves in the highlights section below, and find out why the Options Trader is so excited about this big selloff.
Today’s Portfolio Highlights:
Value Investor: With the economy growing stronger, the Fed can’t really justify keeping rates so low. The question for the housing market is: Will there still be as many buyers in a rising rate environment? We don’t know the answer to that question just yet, but we do know that the housing market is a bit worried. Shares of KB Home (KBH) are down sharply of late on these fears of higher mortgage rates. Tracey still likes the company and the industry, but figured that the best move right now was to sell KBH and secure a nice return of approximately 90%. Read more in the full write-up.
Home Run Investor: Expectations are very high this earnings season, so Brian Bolan doesn’t want to risk being in a name that may not post a strong guidance. Shares of Fortinet (FTNT) have shaken off some recent downgrades, but the editor says “the Wall Street writing is on the wall” for this cybersecurity stock. He thinks the risk-reward is just skewed the wrong way. Therefore, he sold FTNT on Friday and secured a more than 20% return.
But that wasn’t all. Brian thinks that the Zacks Rank #3 (Hold) status for Bottomline Technologies (EPAY) is primed to improve. The company recently posted a solid beat, which continued a string of positive surprises over the past several quarters. It also raised its guidance on the call. He thinks there’s a lot of upside here, so EPAY was added to the portfolio. Read the full write-up for more on today’s activity.
Technology Innovators: The strong report from Tableau Software has Brian Bolan feeling pretty good about Splunk (SPLK). Both of these companies are in the “big data” space ,but SPLK doesn’t report until later this month. The stock also has a Zacks Style Score of “A” for Growth. The editor thought this was a good spot to add the stock to the portfolio. Read the full write-up for more.
Options Trader:“I’m very excited about this long awaited pullback. What’s that you say? Excited? Absolutely!
“I have been talking about the potential for increased volatility as we approach the upcoming spending bill deadline next week. This created a fantastic excuse to pull some profits off the table after last year’s spectacular gains and this year’s record start to the new year.
“As I have been saying, any pullback due to the spending bill uncertainty is likely to be transitory. And this will present a phenomenal opportunity to pick up stocks at levels you only wished you could have picked them up at previously.
“So am I excited? You bet I am.” — Kevin Matras
Have a Great Weekend,
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