Dow Back Below 34K as Stocks Slip for Second Day

Jim Giaquinto
·4-min read

Stocks took another small step backward from its record-setting pace on Tuesday as earnings season heats up. However, the losses over the past two days have been very orderly and leave the indices just shy of record territory.  

The Dow is back below 34K after sliding 0.75% (or about 256 points) to 33,821.30, while the S&P dipped 0.68% to 4134.94. These indices started the week at record highs but have taken a break over the past two sessions. The NASDAQ again saw the steepest decline by dropping 0.92% (or about 128 points) to 13,786.27.

The editors have mentioned that the market may need to cool down a bit after all the encouraging developments of late, which includes the strong start to earnings season, an impressive round of economic data and the Fed’s consistent reiteration of super accommodation.

You can just feel earnings season revving up. Some of the big reports today included household names like Johnson & Johnson (JNJ) and Procter & Gamble (PG), which both beat expectations on the top and bottom lines. Shares responded by gaining 2.3% and 0.83%, respectively, which is pretty impressive since the market expects near perfection this season.

The big earnings news of the day, though, came after the close when the first FAANG took center stage. Netflix (NFLX) announced first-quarter results that beat earnings and revenue expectations. However, the market was underwhelmed with subscriber additions from this streaming pioneer.  

The company added only 3.98 million subscribers in the quarter when more than 6 million additions were expected. Furthermore, it sees only 1 million new additions in the second quarter, though it should pick up afterward when new seasons of its shows are released. Shares are down approximately 10% after hours as of this writing.  

“Expectations are high for earnings season, so companies are going to have to deliver on as many key metrics as possible,” said Kevin Matras in today’s Options Trader. “We’ll get another 87 companies reporting earnings tomorrow, a total of 305 for the rest of the week. And another 994 next week.”

Today's Portfolio Highlights:

Surprise Trader: Can you smell what Dave is cooking? For Tuesday’s addition, the editor picked up World Wrestling Entertainment (WWE), which is The Rock’s old stomping grounds and a Zacks Rank #1 (Strong Buy). The company has surpassed the Zacks Consensus Estimate for seven straight quarters, including an average beat of 81% over the past four. And now it has an Earnings ESP of 11.1% for the quarter coming after the bell on Thursday, April 22. Dave added WWE today with the portfolio’s remaining cash, which comes to an allocation of approximately 12.3%. Read the full write-up for more.

TAZR Trader: The risk/reward of this portfolio is constantly being evaluated by Kevin based on what the market is doing. With stocks under pressure on Tuesday, the editor decided to raise some cash by selling half of Square (SQ) and Novavax (NVAX) for profits of approximately 20% and 16%, respectively.

Zacks Short Sell List: The portfolio swapped out three positions in this week's adjustment. The stocks that were short-covered included:

• Teradata (TDC, +1.8%)
• Shift4 Payments (FOUR, +1.5%)
• BioMarin Pharmaceutical (BMRN)

The new buys that filled these opened spots are:

• NovoCure (NVCR)
• StoneCo (STNE)
• Yandex (YNDX)

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 portfolio's short positions in China Lodging (HTHT) and Twitter (TWTR) were among the best performers today with gains of 3.6% and 3.3%, respectively.

Headline Trader: "The market is looking shaky at its currently frothy levels as the highly anticipated Q1 earnings season commences.

"There was a trend last earnings season of pulling profits off earnings reports even when expectations were exceeded, and at these levels, I wouldn't be the least bit surprised if this happened again.

"There is so much optimism going into these earnings reports that anything short of an unbelievable quarterly release could easily lead to a share price pullback across every market sector."
-- Dan Laboe

All the Best,
Jim Giaquinto

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