Italian Politics Take Bite Out of U.S. Market

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The political fiasco in Italy finally impacted the U.S. market on Tuesday, sending the Dow lower by nearly 400 points on the first day back from the long Memorial Day weekend.

The EU's third largest economy is still without a government more than 80 days after the March elections that saw populists emerge victorious. Over the weekend, the country's President blocked the creation of a coalition government, so a new round of elections is probably on the horizon. Here at home, U.S. investors are having nightmares that a new Eurozone crisis is near.

The financials really took it on the chin today, sending the Dow lower by 1.58% to 24,361.5. However, the index did come off its lows of more than 500 points. The S&P dropped 1.16% to 2689.9 while the NASDAQ slipped by 0.50% to 7396.6. The small-cap Russell 2000 had the best performance with a decline of only 0.20% to 1623.7.

"As with most market-related risks, we are getting somewhat of an overreaction here. Markets roiled, putting the pressure disproportionately on bank stocks. There was nowhere for the financials to hide, bringing down the market across the board," said Dave in Momentum Trader , Surprise Trader and Blockchain Innovators .

In the portfolios, Stocks Under $10 got fully invested by adding its 15th name, while Short List and Black Box Trader swapped out four names and two names, respectively. Learn more in the highlights section below:

Today's Portfolio Highlights:

Stocks Under $10: With today's addition of National Cinemedia (NCMI), the portfolio is now fully invested with 15 names. The company operates the largest digital in-theatre network in North America. NCMI regularly proves that people are still going to movie theaters, despite flat screens, home entertainment setups and streaming content. In its first quarter, the company beat by 50% and earnings estimates are on the rise. Read the full write-up for a lot more on this new addition, including its earnings history, estimate revisions and valuation.

Zacks Short List:
The portfolio changed four positions in this week's adjustment. The names that were short-covered include:

• Agnico Eagle Mines (AEM)
• Charter Communications (CHTR)
• Spectrum Brands (SPB)
• Teradata Corp (TDC) 

The new buys that filled up these open spots are:

• China Lodging (HTHT)
• Sina Corp (SINA)
• Schlumberger (SLB)
• Williams Partners (WPZ)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Black Box Trader: There were only two swaps in this week's adjustment, which was postponed until today due to Memorial Day. The positions sold on Tuesday were Univar Inc. (UNVR) and NRG Energy (NRG). The new buys that replaced these names are Huntsman Corp (HUN) and Terex Corp (TEX). Read the Black Box Trader's Guide to learn more about this computer-driven service designed to take the emotion out of investing. 

Zacks Confidential: It's understandable why many investors would be wary of higher-priced and high-beta stocks. But excluding such names severely limits your profit potential. The better plan is to learn how to trade such stocks. Jeremy Mullin has spent his whole career learning about tools that give him an edge, and Kevin has asked him to explain them in this week's Zacks Confidential. Read his article and gain some confidence in these lucrative names, along with a couple of stock picks to get you started: Trading High Price Stocks.

Counterstrike: "The fear I speak of is coming from Europe, mainly Italy. The debt problems have been known for years, but recent political issues over the weekend has interest rates and credit spreads flying high. This is hurting equity markets across Europe as fears of contagion through European banks could collapse the Euro Zone. Sound familiar?

"Yes, its like its 2011 all over again. Back then the Greece financial crisis controlled markets. Every headline out of Greece seemed to move the Dow 100 points. So, are we headed back for another crisis in Europe?

"I don't believe so, but this obviously needs to be monitored closely. I'm not even going to try and analyze Italian politics, but we need to keep an eye on what's going on over there. Overall, I think the market has been looking for excuses to sell-off lately and today we got a really good one."
-- Jeremy Mullin 

Good Evening, 
Jim Giaquinto 

Recommendations from Zacks' Private Portfolios:

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
Referenced Symbols: UNVR , NRG , HUN , TEX , AEM

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