S&P Below 2800 Again after Monday Selloff

This more than two-month rally combined with a slow trade deal process really weighed on the market to start this week. The major indices all lost ground on Monday, but came well off the lows by the closing bell.

Unfortunately, they were also well off the highs. Stocks started the session solidly in the green, before soft construction spending data for December provided an excuse to sell-off.

The Dow jumped approximately 130 points this morning… and then dived to a loss of about 400 points. It managed to halve that deficit by the close but still declined 0.79% (or about 206 points) to 25,819.65.

The S&P’s trip above 2800 was short-lived. The index reclaimed that mark on Friday for the first time since November, but today it slipped 0.39% to 2792.81. The FAANGs had a pretty solid session despite the negativity, helping the NASDAQ to the best performance of the day with a loss of only 0.23% to 7577.57.

Lower-than-expected construction spending of 0.6% in December (delayed due to the shutdown) feeds into concerns of slowing economic growth. But the swiftness of today’s selloff suggests that investors were just looking for a reason to take some money off the table after such a long run up.

Meanwhile, the trade headlines continue to be positive. In fact, reports say a deal is in the final stages, and could be signed later this month at a meeting between President Trump and President Xi of China.

It can’t come soon enough for the market. We’ve been at the mercy of trade headlines for too long now. Many investors believe that today’s pullback suggests a deal is completely baked into the market and could result in a “sell the news” reaction. Maybe. But the most important thing is that we put this issue into the rear-view mirror.

Today's Portfolio Highlights:

Marijuana Innovators: We’ve talked about it enough… and now it’s time for the inaugural picks of this new service! The following recommendations haven’t been picked just because they have some connection with the burgeoning marijuana space. Editor Dave Borun is also making sure that these are solid companies with big potential for growth… especially when the U.S. joins its northern neighbor in official legalization. The first three positions are:

• GW Pharmaceuticals (GWPH): This company is a “clear market leader in the industry” as it was the first to receive FDA approval for a prescription drug made from CBD (Cannabidiol).

• Canopy Growth Corporation (CGC): In addition to medical uses, this company supplies cannabis for recreational use at home. CGC also received a big investment from beverage giant Constellation Brands.

• Molson Coors (TAP): The world’s 7th largest brewer has plans to develop non-alcoholic cannabis-infused adult beverages. As with CGC, this company can’t wait for the U.S. to officially legalize marijuana.

Dave plans to add SEVEN more names tomorrow as he works to get the portfolio up to his target complement of 10 to 15 positions. Read the complete commentary for a lot more about these inaugural buys and the editor’s plans for the portfolio.

Technology Innovators: 5G is basically right around the corner. Clearfield (CLFD) is a fiber optic play that wants to make sure there’s enough bandwidth for the new technology. Brian Bolan likes its recent history of beating the Zacks Consensus Estimate, which includes a positive surprise of more than 96% over the past four quarters. When 5G really picks up, the editor expects CLFD to be along for the ride. He added the stock on Monday and expects at least one more buy later this week. Read the full write-up for more.

Black Box Trader: It’s almost a whole new portfolio after this week’s adjustment swapped out 9 names. The stocks that were sold today include:

• Meritor (MTOR, +7.7%)
• Foot Locker (FL, +5.8%)
• Robert Half Int’l (RHI, +0.3%)
• Anthem (ANTM)
• Athene Holding (ATH)
• Dollar Tree (DLTR)
• CBRE Group (CBRE)
• Newmark Group (NMRK)
• McKesson Corporation (MCK)

The new buys that replaced these names are:

• Live Nation Entertainment (LYV)
• Charter Communications (CHTR)
• Abercrombie & Fitch (ANF)
• Tenet Healthcare (THC)
• Terex Corp. (TEX)
• Quanta Services (PWR)
• Boeing (BA)
• Spirit AeroSystems (SPR)
• Booz Allen Hamilton (BAH)

Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing.

Have a Good Evening,
Jim Giaquinto