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Banks Loved Yellen's Testimony | The Mesh Report

Banks Loved Yellen’s Testimony

Zacks Equity Research February 15, 2017 Comments Off on Banks Loved Yellen’s Testimony

Bank stocks really loved what Janet Yellen had to say on this Valentine’s Day. The Fed Chair said the plan is to gradually increase rates over time, or run the risk of having to play catch up down the line with much sharper hikes. Banks would be among the biggest beneficiaries of higher rates, so they took off after Yellen’s testimony and broke the rest of the market out of a morning haze.

The S&P was up 0.40% on Tuesday to 2337.6 and the NASDAQ increased 0.32% to 5782.6. Amazingly, the Dow is now more than halfway to 21,000 with today’s advance of 0.45% to 20,504.4.

In the portfolios, the Reitmeister Trading Alert sold a couple of names for solid returns, while Stocks Under $10 bought a stock in what the editor calls a “risk on” environment. Short List swapped out three positions in this week’s adjustment. Read more about these moves in the highlights section below:

Today’s Portfolio Highlights:

Reitmeister Trading Alert: Shares of Groupon (GRPN) soared on Tuesday, just a day before it reports quarterly results. However, Steve is a tad concerned about a “tepid” earnings preview that he saw, so today’s rally opened a perfect opportunity to trim the position as a precaution while making a nice 9.8% profit. The portfolio is holding onto a 5.6% position.

While in a profit-taking mood, Steve also decided to sell some shares of Fabrinet (FN), which is spiking to new highs but can be very volatile. The haircut brought a return of 12.1% and leaves the portfolio with a 6.8% allocation. By the way, FN is the top-performing stock of all the portfolios over the last 30 days.

Stocks Under $10: The Trump tax statement has pushed the market higher, which Brian thinks will last for the next week or more. He also believes this is signaling a “risk on” environment. With that in mind, the editor bought Golden Ocean Group (GOGL) for Stocks Under $10 on Tuesday. GOGL is a Zacks Rank #2 shipping company that transports dry bulk cargoes. The idea here is that a spike in volume will bring interest back into shippers like GOGL, and that the “risk on” feeling will attract even more buyers than usual. Read the full write-up for more on this new addition and get ready for another buy tomorrow.

Zacks Short List: This week’s adjustment included three swaps, including short-covering NEM, INCY and CAT. The new additions that replaced these names are Level 3 Communications (LVLT), Paycom Software (PAYC) and Weyerhaeuser Co. (WY). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Zacks Counterstrike: “The big story of the day was Yellen’s remarks in front of the Senate Banking Committee. She didn’t say a March move is a done deal, but did mention that it would be “unwise” to delay further tightening as this would mean more rapid rate hikes down the road.

“The market took the statement as another reason to buy stocks. Financials led the way on the thesis that higher rates will good for the bottom line. Biotech, housing and retail all saw strength throughout the day.

“We have now seen six consecutive days of advance for the SPY S&P 500 ETF. This matches the longest bull run in 3yrs, the last one was on 2/14/15, which was eight days. I went back and looked at the chart, after that streak was over the market fell about 4% in two weeks, so don’t be shocked if we get a pullback before the month is over.” – Jeremy Mullin

All the Best,
Jim Giaquinto
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