Market Ignoring Strong Earnings

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What a frustrating week! Earnings season is living up to lofty expectations with some very impressive numbers, as approximately 80% of S&P companies have beaten expectations. But the market just doesn't seem to care. 

A strong Friday session could have given the major indices a positive weekly performance. Instead, two of the major indices could muster only anemic gains, while the third couldn't even do that. And these results come in the wake of Amazon doubling profits year over year, along with better than expected results for GDP and consumer sentiment. 

At the end of the day, the S&P rose only 0.11% to 2669.9 for a slightly negative week. The NASDAQ inched forward by 0.02% to 7119.8 and the Dow declined 0.05% to 24,311.2, marking weekly losses of 0.4% and 0.6%, respectively. 

The editors are as annoyed as anyone by this market right now, but they are overall pretty positive that stocks will pick an upward direction soon. We saw this optimism in the portfolios today. Home Run Investor added an energy name while TAZR bought a bullish ETF as a bet on rising tech stocks. Tracey added two names to Insider Trader and Value Investor each, while also pulling a double digit profit from the latter. Learn all about these moves in the highlights section below:

Today's Portfolio Highlights:

Home Run Investor: Brian Bolan is getting more and more bullish on this market, and today he wanted to widen the portfolio's diversification even further by adding an energy name. The editor picked up Solaris Oilfield Infrastructure (SOI), a manufacturer and provider of patented mobile proppant management systems to oil and natural gas well sites. This Zacks Rank #1 (Strong Buy) company has an Earnings ESP of approximately 6% for the quarter being reported on May 8. The portfolio is now two holdings shy of being fully invested at 20 names. Get more specifics on this new addition in the full write-up.

Insider Trader: Shares of Philip Morris (PM) are down 20% year-to-date and it just reported disappointing earnings. But that didn't stop the Deputy General Counsel from buying 3,000 shares a few days ago. Tracey was shocked to see the lawyer buy, since they are usually more conservative than other insiders and rarely make moves outside of a cluster buy scenario. She decided to take a chance and add the name to her holdings.

But that wasn't all. The editor really loves the small cap E&Ps right now, so she decided to buy Lonestar Resources (LONE) on Friday even though the portfolio already has a lot of exposure to energy. Earlier this month, the CEO and COO picked up shares. Tracey added each stock with 10% allocations. Learn a lot more about these new additions in the complete commentary.

TAZR Trader: The portfolio has a lot of cash on the sidelines and Kevin wants to make a bet that the tech sector's recent lows will hold and move higher after Apple reports on Tuesday. Therefore, the editor added a "starter" position of 5% in the NASDAQ 100 3X Bull ETF (TQQQ). Read more about this move and Kevin's overall trading philosophy in the full write-up.

Value Investor: The portfolio made two new buys on Friday. Tracey is a big fan of the banks right now and she wants to get a piece of the economic boom in California. Therefore, she bought PacWest Bancorp (PACW), a Zacks Rank #1 (Strong Buy) regional bank that is expected to grow earnings 26% this year and another 8.2% next year. But shares are still cheap.

The other buy was Western Digital (WDC), which sold off recently despite a strong quarterly report. The portfolio is already overweighted in the semiconductors and storage sector, but the stock is so dirt cheap after the overdone pullback that Tracey decided to add it. The portfolio also sold KKR (KKR) today for a more than 10% return after momentarily falling to a Zacks Rank #5 (Strong Sell). Read the complete commentary for more on all of today's moves. 

Counterstrike: "The reason for the selling has to do with the idea that we might be running into "Peak Earnings". A term you will start to hear more. 

"The idea behind this phrase is that earnings just won't get any better than they are now. Since the market is forward looking, all the moves higher in earnings are being sold into, thus hurting the overall indices. 

"The end result is a market that is very choppy and very volatile. I thought this week would be the week the market picked a direction, but we are sitting in the same area we were last week, so perhaps next week we will make a move. 

"We will see if this momentum will continue into May. Remember the old saying "Sell in May and go away". Let's hope that isn't the case this year." -- Jeremy Mullin 

Have a Great Weekend! 
Jim Giaquinto

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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 , Earnings
Referenced Symbols: SOI , PM , LONE , TQQQ , WDC

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