Late Rally Ends the Dow's Slump

Remember, the latest episode of the Zacks Ultimate Strategy Session will be available for viewing no later than this Wednesday, October 10. Sheraz Mian, Neena Mishra, CFA, FRM, Ryan McQueeney and David Bartosiak will cover the investment landscape from several angles in this informative event.

Don't miss your chance to hear:

• Neena and Ryan Agree to Disagree on whether investors should buy pot stocks now

• Sheraz answers your questions in Zacks Mailbag

• Neena and Ryan choose one portfolio to give feedback for improvement

• And much more

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After losing approximately 400 points in the previous two sessions, the Dow managed to stage a comeback on Monday that helped it get back into positive territory. The other major indices also rallied in the second half of the session, but couldn't make it into the green as the market continues to wrestle with rising rate fears.

At its worst of the session, the Dow seemed set for another big plunge. However, it fought back and finished with an advance of 0.15% to 26,486.78. That's not very impressive at first glance, until you consider that it had slipped more than 220 points at midday. Only a week ago the index was at a new all-time high just under 26,830.

Tech remains in the doghouse as the FANGs all finished lower. The NASDAQ was the worst performer again with a drop of 0.67% to 7735.95. The S&P saw daylight for a few moments on Monday, but eventually ended lower by 0.04% to 2884.43. Each of these indices now have three-day losing skids, though they too managed to recover significantly from their lows.

Stocks are again obsessed over rising rates, as the 10-year note jumped past 3.2% last Friday. At least the Dow hasn't had any 1000-points drops like earlier this year! Instead, difficult sessions last Thursday and Friday ruined what could have been a really positive start to the fourth quarter. In the end, the NASDAQ and S&P were each down approximately 1% last week while the Dow gave up all of the points it earned on Monday through Wednesday.

No one knows how long this sluggishness will continue. But it's important to note that while the market may be weak right now, the economy is not. Stocks will be getting more potential catalysts when earnings season unofficially starts on Friday with reports from a few of the big banks. Until then, it could be a bumpy ride.

Today's Portfolio Highlights:

Stocks Under $10: One of the sectors that's been spared from this recent market selloff is the oil patch, so that's where Brian Bolan went for today's promised addition. Halcon Resources (HK) is a Zacks Rank #1 (Strong Buy) energy company that is coming off a solid quarterly report, which included a positive surprise of 600%! The editor thinks this stock has some good momentum now, as evidenced by the Zacks Consensus Estimate for this year surging to breakeven from a loss of 17 cents. And next year is expected at 25 cents. The editor likes HK's earnings growth potential and decided it would be a good pick for the portfolio. Read the complete commentary for a lot more and get ready for another buy tomorrow as Brian gets the portfolio fully invested .

Healthcare Innovators: The market may very well have further to fall this month…and Kevin plans to take full advantage of it! That's why the editor added a couple of names on Monday. Firstly, the portfolio picked up Illumina (ILMN), which Kevin calls the "Boeing of Genomic Exploration". The company sold off a bit on soft channel checks for its flagship gene sequencing platform. However, this service looks at the long-term and not near-term turbulence. The segment is growing at 25% annually as more and more institutions can't help but expand their presences in this growing field, which means ILMN has tons of potential moving forward.

The other buy today was Zacks Rank #1 (Strong Buy) medical instruments company Penumbra (PEN), which has a proprietary neurovascular technology for the treatment of strokes. Kevin is encouraged by this tech…and he's not the only one. A brokerage recently released a very positive read on PEN, stating that the company will pick up more market share in the next few years with revenue growth of about 20%. Read the complete commentary for a lot more on these moves, including their buy ranges.

TAZR Trader: Even though October is usually a pretty good time for the market, Kevin wants you to be prepared for a possible pullback this month. He thinks the Dow could slip about 2.5% from here to 25,750. In fact, if things get really bad, then the index could fall more than 5% to 25,000. To be prepared, the editor added a 10% allocation in ProShares UltraPro Short Dow30 ETF (SDOW) on Monday. Read the complete commentary for more.

Black Box Trader: Big changes for the service in this week's adjustment! In fact, it's practically a new portfolio as NINE names were swapped. The stocks that were sold today included:

• Cigna Corp. (CI)

• Walgreens Boots Alliance Inc. (WBA)

• Nutrien Ltd. (NTR)

• The TJX Companies Inc. (TJX)

• Cleveland-Cliffs Inc. (CLF)

• American Outdoor Brands Corp. (AOBC)

• Tractor Supply Company (TSCO)

• United Rentals Inc. (URI)

• Molina Healthcare Inc. (MOH)

The new buys that replaced these names are:

• CVS Health Corp. (CVS)

• Dollar General Corp. (DG)

• Hertz Global Holdings Inc. (HTZ)

• Kohl's Corp. (KSS)

• Principal Financial Group Inc. (PFG)

• Sprouts Farmers Market Inc. (SFM)

• T-Mobile US Inc. (TMUS)

• Target Corp. (TGT)

• Voya Financial Inc. (VOYA)

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: You can't underestimate how important it is to invest in the right industry. As Kevin has said countless times, an average stock in a strong industry will likely outperform a great stock in a poor industry. The Zacks Industry Rank is an amazing tool to help you find the hottest spaces in the market. Jeremy Mullin uses this source all the time in his investing, and so Kevin has asked him to use this week's Zacks Confidential to explain how it works. Along the way, get three top stocks from the three top industries: Finding Stocks with the Zacks Industry Rank .

Until Tomorrow,

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.

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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