NASDAQ Positive for the Week Despite Airstrike Concerns
The S&P’s five-week winning streak came to an end on Friday as a U.S. airstrike in the Middle East forced this rally to take a break.
The index declined 0.71% today to finish at 3234.85, which is only a little more than 5 points below last Friday. However, that was enough to end an impressive run that stretched all the way back to Thanksgiving.
The NASDAQ managed to remain barely positive for the week despite a decline of 0.79% (or about 71 points) to 9020.77. The Dow slipped 0.81% (or nearly 234 points) to 28,634.88, which was down about 10 points from last Friday.
The indices came into the session solidly higher for the week after starting 2020 yesterday with a nice rally, which included gains of more than 1% for the Dow and NASDAQ.
But last night, we received news that the U.S. killed Iran’s top military leader in an airstrike.
With tensions already on the rise between the U.S. and Iran after our embassy was attacked in Baghdad, this action had the market worried about retaliation and a continued deterioration of the two countries’ already strained relationship.
Crude oil surged more than 3% on the day.
We also received another disappointing read on manufacturing, as the ISM index came in at 47.2 for December. That’s below expectations of around 49 and marked the fifth straight month of contraction (sub 50 reading).
So between the Middle East and manufacturing here at home, the market finally had some reason to pullback.
However, you’ve probably noticed that this wasn’t much of a decline. In fact, the major indices gained more yesterday than they lost today.
This certainly didn’t feel like the air coming out of rally. Instead, it seemed like the bulls saw a reason to take a break, which means this slump could be a buying opportunity moving forward.
So let’s keep watch for any new developments or escalation over the weekend, and then get ready to start the first full week of 2020 on Monday.
Today’s Portfolio Highlights:
TAZR Trader: There are plenty of ways that Iran could retaliate for the recent airstrike, including a cyber attack. So its fitting that Kevin has put a lot of emphasis behind cyber security with last month’s additions of Proofpoint and CrowdStrike (CRWD) in particular, which specializes in the type of ransomware attack executed by two Iranians against Atlanta utilities and government services in 2018. After starting a new position in CRWD on December 30, the editor added more to the position today. Along with the advantageous environment, one firm recently said that this cloud-delivered endpoint protection company is poised for “another year of hyper-growth”. Read Kevin’s complete commentary for a lot more on this move.
Counterstrike: “If my job were to speculate on what happens next, first I must accept that Iran’s ability for a response is minimal. I don’t expect a response at all, but I do expect rhetoric and headlines that could move the oil markets. If there is some kind of military response, it will be met with a massive U.S. military counter, which could include taking out Iran refineries. This response would immediately cripple the Iran economy and any military ability.
“Everything I just said is pure speculation, in reality I have no idea what will happen. However, just like the Chinese trade war, we now have a risk. Markets will fall sharply on any bombing headlines, but I would view the drops as buying opportunities.
“Potentially big headlines over the weekend. I don’t know what to expect from Iran, but hopefully they realize they can’t do anything and just talk as they do. We just escaped from the trade war headlines, last thing we need is war headlines.” — Jeremy Mullin
Have a Great Weekend!
Jim Giaquinto
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