Rate Cut Doesn't Help As Stocks Slide Nearly 3% Again

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The market nearly had another 3% plunge on Tuesday despite an emergency interest rate cut, but the losses did not overwhelm yesterday’s epic rally.

Investors have been expecting more easing ever since the coronavirus started impacting the global economy, but it was a bit of a surprise that this 50bps cut came two weeks before the next meeting.

That’s the first intra-meeting cut since the financial crisis… a comparison that the market didn’t care much for.

Even though the cut was expected, the timing of it concerned investors more than it reassured them. Many of them were thinking: ‘How bad must the situation be if they have to cut RIGHT NOW?!’

Fed Chair Jerome Powell stated that the economy is still looking good, but the spreading virus could impact things moving forward. So they decided to act.

After rising sharply in a kneejerk reaction to the news, stocks reversed course and plunged again. Also, the 10-year treasury yield dipped below 1% for the first time ever.

The NASDAQ dipped 2.99% (or about 268 points) to 8684.09, while the Dow slid 2.94% (or around 785 points) to 25,917.41. The S&P managed to stay above 3000, but still fell by 2.8% to 3003.37.

As rough as these results were, they would’ve felt even worse if we didn’t get a historic rally on Monday. Yesterday, the Dow jumped nearly 5.1% (and had the biggest single-day points gain in history), while the NASDAQ and S&P each gained about 4.5%.

So we’re still up for the week! Too bad it’s only Tuesday.

Today's Portfolio Highlights:

Stocks Under $10: Though sometimes it’s hard to do, Brian likes to buy in the midst of a pullback because you can never really know when the recovery rally will begin. On Tuesday, while the major indices were putting in another round of nearly 3% losses, the editor added Opera Limited (OPRA). This Zacks Rank #2 (Buy) web browser provider reported a strong quarter late last month, which included revenues of nearly $130 million that improved 158% from last year and beat expectations. The stock was up 2.4% on Tuesday while much of the market was sliding again. Read the complete commentary for a lot more on this new addition.

Surprise Trader: Given the market’s overall downturn of late, Dave decided to sell the rest of his position in automotive seating supplier Adient (ADNT) while he could still get a nice 11.7% return. The first half also brought a double-digit return when the editor sold it a month ago. The new buy is Option Care Health (OPCH), which provides infusion and home care management solutions. The company has a positive Earnings ESP of 166.67% for the quarter coming before the bell on Thursday. The stock is down along with the rest of the market today, so Dave is getting a good entry price for his 12.5% position. Read the full write up for more on OPCH.

Zacks Short List: The portfolio swapped only one position in this week’s adjustment. It short-covered Eldorado Resorts (ERI) for a nice return of 22%, and then replaced it by adding China Lodging (HTHT). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

All the Best,
Jim Giaquinto

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