July Marks Four Straight Months of Gains

Last night’s deluge of big tech earnings eventually helped stocks advance in Friday’s session, capping off a fourth straight month of gains for the indices despite this ongoing pandemic.

For all the talk in recent weeks of tech coming under pressure, the NASDAQ still easily outperformed its counterparts in July with a healthy advance of 6.8%.

Meanwhile, the S&P gained 5.5% in the month and the Dow increased 2.4%.

Those were better monthly performances than June!

The market was still buzzing today about Thursday nights strong reports from tech leaders Apple (AAPL), Facebook (FB), Amazon (AMZN) and Alphabet (GOOG). Each company beat expectations despite coronavirus challenges.

The biggest reaction was for AAPL, which soared approximately 10.5% after reporting its best third quarter ever and initiating a 4-for-1 stock split. FB wasn’t too far behind with an advance of nearly 8.2%.

AMZN rose a respectable 3.7%, while GOOG fell after announcing its first quarterly revenue loss ever (though it still beat expectations).

As solid as these reports were, it didn’t look like they would have legs on Friday as the Dow and S&P each spent most of the session in the red. The former index plunged by as much as 300 points at its worst.

However, stocks had no fear of the weekend this time and darted sharply higher late in the day, led by the NASDAQ (of course). The index spent most of its time on the plus side, though it did bounce around quite a bit. The end result was a surge of 1.49% (or around 157 points) to 10,745.27.

The S&P advanced 0.77% to 3271.12, while the Dow recovered from its earlier sluggishness to rise by 0.44% (or nearly 115 points) to 26,428.32.

The S&P and NASDAQ were also higher for the week.

Now the coronavirus relief bill will gain urgency in the news flow as the current benefits are just about done. Congress had all week to figure something out, but we’re still waiting.

If this were an economic report, we’d say that Washington “met expectations”, because no one really believed they would get anything done in a timely manner.

However, they are expected to have something sooner or later, especially since the economic reopenings haven’t been going as smoothly as hoped lately given the spike in coronavirus cases. This is an election year, after all!

Well, we knew this would be a hectic week with hundreds of earnings reports, a Fed meeting and a read on GDP. It didn’t disappoint! It was extremely busy… but mostly positive.

And we’re not going to get a break anytime soon.

We’ll see hundreds more earnings reports next week, as well as plenty of economic data that culminates with next Friday’s employment situation report. And no one knows what surprises Congress will have for us.

So get a good rest this weekend and be ready to start a new month on Monday….

Today's Portfolio Highlight:

Insider Trader: We’ve all heard of the trouble Intel (INTC) is having right now. Shares have plunged recently after the chipmaker delayed its 7nm chip by at least a year. However, one day after announcing that delay, the CEO bought over 8000 shares at $50 through the 10b5-1 program. Tracey considers this to be a ‘CEO confidence buy’. In other words, he’s buying shares after some bad news to show that he still believes in the company and wants to take advantage of a bargain price. This portfolio followed him on Friday by adding INTC with a 10% allocation. Read the full write-up for more on the editor’s move.

Surprise Trader: The final pick of this insanely busy week of earnings was Benefitfocus (BNFT), a cloud-based software solutions company that will be going for its tenth straight quarterly beat on Wednesday, August 5 after the bell. It just so happens that this Zacks Rank #2 (Buy) has a positive Earnings ESP of 6.25% for that upcoming report. It topped by more than 19% last time. Dave added BNFT on Friday with a 12.5% allocation, while also selling the underperforming MaxLinear (MXL). Read the full write-up for more.

Value Investor: The housing market is strong and healthy these days, so Tracey got back into the homebuilders on Friday by adding M.D.C. Holdings (MDC). The company reported a ‘blowout’ quarter recently as the months of May and June have been epic for this space after a slowdown in April. The editor added this name in particular because its substantial cash flow allowed for a dividend hike of 10%. It now has one of the highest yields in the space at 2.9%. But that’s not all… 

Tracey also wanted a piece of the gold surge, so she added Zacks Rank #2 (Buy) mid-cap Canadian gold miner B2Gold (BTG). The stock is up 71% year to date and earnings estimates are on the rise. Along with a PEG of just 0.8%, BTG is a rare value stock that is also growing. The company reported several quarterly records in the first quarter and is scheduled to go to the plate again on August 5 after the close. Read the complete commentary for a lot more on these new buys, including specifics on their value characteristics. By the way, this portfolio had the best-performing stock of the day among all ZU services as Pinterest (PINS) soared 36.1% after a surge in user growth in its second quarter.

Technology Innovators: Not every tech/biotech play is a drug maker. Take Simulations Plus (SLP) as an example. This Zacks Rank #2 (Buy) develops drug discovery and development simulation software, which is used in drug research by major pharma and biotech companies. SLP has beaten the Zacks Consensus Estimate in three of the past four quarters. The most recent report beat expectations by 233%. Brian doesn’t expect the growth to slow here and sees a 25% operating margin. However, if the margin moves to 35%, then shares of SLP could double. Read the full write up for more.

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.

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