Mixed Session While Watching Yields and Washington


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The NASDAQ made an attempt to recover some of yesterday’s sharp losses this morning, but the rally ultimately failed on Wednesday as Treasury yields steadied but remained high. The other major indices managed slight gains as we move toward the final day of September.
The tech-heavy index slipped 0.24% (or about 34 points) to 14,512.44. This decline makes four straight days of losses for the NASDAQ, including yesterday’s 2.8% plunge. The 10-year is still above 1.5%, but remains below its recent high of more than 1.56%.
Meanwhile, the Dow rose 0.26% (or about 90 points) to 34,390.72, following a 1.6% plunge on Tuesday that snapped a four-day winning streak. The S&P was up 0.16% to 4359.46 after a 2% dip yesterday.
The historically difficult month of September mercifully comes to an end tomorrow. The sharp Tuesday selloff made this already lackluster period look even worse. The NASDAQ is now down more than 5% for the month, while the S&P and Dow are off 3.7% and 2.8%, respectively.
However, the S&P and NASDAQ are slightly higher for the quarter, which also ends on Thursday.
Congress isn’t helping the situation. Another thing that expires tomorrow is the government’s funding, which means October could begin with a shutdown. A bill that would’ve kept things funded through early December was blocked on Monday and they’re still trying to get something done before the deadline.
And then there’s the debt ceiling, which needs to be taken care of sometime in October or risk an unprecedented default of U.S. debt. At the moment, the market is much more concerned about rising yields than anything happening in Washington, though news from the Capitol could certainly impact stocks over the next few sessions.
“The good news is that we’ve been through so many government shutdowns over the last 10 years, that Wall Street doesn’t get panicked anymore. But the bigger concern is still the debt ceiling,” said Tracey Ryniec in Insider Trader.
“So far, Wall Street is still assuming it will get raised by the Oct 18 deadline that Treasury Secretary Yellen says is the absolute last day the US can pay its bills. But the gamesmanship around the debt ceiling isn’t healthy either. I would look for further weakness on Wall Street until some of these issues are resolved.”
Do you think September 2021 will go out quietly tomorrow? You probably shouldn’t bet on it. Let’s buckle up and see what happens…
Today’s Portfolio Highlights:
Headline Trader: The SPAC (special purpose acquisition company) market came under a lot of pressure earlier this year, but now Dan thinks “this nascent asset class has sunk back below investors’ radars”. Therefore, it looks like a good place to invest again, and the editor sees a fantastic opportunity with G Squared Ascend I (GSQD). This blank check company intends to merge with Transfix, a “revolutionary” digital business-to-business (B2B) freight marketplace powered by AI. The company is still not profitable, but the freight marketplace has tremendous opportunities for margin improvements, especially when using innovative technologies. The editor decided to add GSQD on Wednesday with a 5% allocation due to its potential moving forward and to better diversity the portfolio with a low beta name. Read the full write-up for a lot more on this new addition.  
Home Run Investor: That selloff the other day was nothing but a buying opportunity to Brian. And on Wednesday, he followed through by adding a company with tons of potential moving forward. Sumo Logic (SUMO) provides software solutions that it calls “continuous intelligence”. This is a new overlay that works with all the cloud components and helps organize and process the data that is coming in. SUMO hasn’t hit the mainstream yet, but it is already routinely beating the Zacks Consensus Estimate with an average surprise of 36% over the past four quarters. Rising earnings estimates lifted the company to Zacks Rank #2 (Buy) status. Since the portfolio was full, the editor needed to sell a name before making a new addition. He decided to get out of Smith & Wesson Brands (SWBI) for a more than 6% return in about four months. See the complete commentary for more on today’s action.
Large-Cap Trader: With the difficult month of September about to end, it’s time for John to make a few changes to the portfolio. This time, he’s only selling one name by getting out of Lattice Semiconductor (LSCC) on fears of a selloff moving forward. The position brings a profit of 23.4% in just two months. The editor is keeping an eye on the holiday shopping season with his three new buys today, which are:
• Capri Holdings Ltd. (CPRI) – apparel & accessories
• Walmart (WMT) – retail giant
• Qualcomm (QCOM) – leader in wireless technologies
These new buys are all Zacks Rank #2s (Strong Buys) in highly-ranked spaces (Top 25% or better in the Zacks Industry Rank). Furthermore, their most recent earnings surprises and their four-quarter average surprises are both in the double digits. John believes that these names will perform well in the upcoming holiday shopping season, which means they should have a strong end to 2021 and solid start to 2022. The portfolio weights will be approximately 5.2% for each position. Read the complete commentary for more specifics on all these moves.
Have a Good Evening,
Jim Giaquinto

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