Dow Reaches First New Record of the New Year

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SPECIAL ALERT: Remember, we need your input to make next week’s new Zacks Ultimate Strategy Session episode the best it can be. There are two ways you can participate:

1) Zacks Mailbag: In this regular segment, Kevin Matras answers your questions ranging from current market conditions, general investing wisdom, usage of the Zacks Rank or any resources of Zacks.com and more. Pretty much anything goes.  

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Just make sure to email your submissions for either one, or both, by Thursday morning, January 7. Email now to [email protected]

The market managed to stay pretty calm amid craziness in Washington on Wednesday and even registered the first new high of the year for one of the major indices.

The Dow jumped 1.44% (or about 437 points) to a new record of 30,829.40, while the S&P was up 0.57% to 3748.14. The NASDAQ didn’t come along for the ride and declined 0.61% (or around 78 points) to 12,740.79.

Of course, the big story today was protestors actually shutting down the Capitol and delaying certification of the presidential election. Unfortunately, it doesn’t look like these challenging times are going to change along with the calendar.

As far as the market is concerned, the Georgia runoffs have a more direct impact. The Democrats took both contests, which gives them control of the Executive and Legislative branches.

The market seemed fine with the results, since it increases the likelihood of more stimulus as we wait for the vaccines to take hold. It also probably means more taxes and regulations, but you’ve got to take the good with the bad when it comes to Washington.

Investors are also happy that they know the makeup of the government for the next couple of years. Clarity is always a big positive for the market.

But the ADP employment report today was not a big positive. Private employers dropped 123,000 jobs in December, which was well off of expectations for a gain.

Most alarmingly, it was the first drop since April 2020. That was at the beginning of this pandemic, and shows once again that the rising cases, new variant and tighter restrictions are being felt in the economy.

The Government Employment Situation report comes on Friday.

Today’s Portfolio Highlights:

Home Run Investor: The portfolio was a little light on Internet exposure, so Brian fixed that on Wednesday by adding Perion Network (PERI). This Zacks Rank #2 (Buy) is a global technology company that delivers online advertising solutions and search monetization to brands and publishers. The editor really appreciates that PERI has beaten the Zacks Consensus Estimate in each of the last four quarters with an average surprise of 102%. The valuation is also attractive, especially the price-to-sales of 1.16x. Brian wants the portfolio to maintain its current exposure level, so he sold the “boring” Comfort Systems USA (FIX) pick for a return of 9.8% in approximately five months. Read the full write-up for more on today’s moves. By the way, this portfolio had the best performing stock of the day as Sterling Construction Company (STRL) climbed 15.45%. Construction Partners (ROAD) also made the Top 5 with an advance of 11.1%.

Surprise Trader: The semiconductor-memory space is #1 on the Zacks Industry Rank, and that’s where Dave went for today’s addition to the portfolio. Micron (MU) is one of the leaders in this area and it has a positive Earnings ESP for the quarter coming after the bell tomorrow, January 7. So this is another “quick turnaround idea” from the editor, who added MU on Wednesday with a 12.5% allocation. See the full write-up for more on this new addition.

Marijuana Innovators: The Democrats taking control of the Senate sent marijuana stocks sharply higher on Wednesday. The idea is that nationwide decriminalization will be easier now. You’ll recall that the Democrat-controlled House voted to decriminalize last month. Today, the portfolio had three of the best performers among all ZU services. Those winners were HEXO Corp. (HEXO, +13%), Aphria (APHA, +11.9%) and Canopy Growth (CGC, +11.6%).

All the Best,
Jim Giaquinto
 

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