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It took a week and a half, but the market finally stepped back in 2018. News that China would slow or stop purchases of U.S. treasuries was given most of the blame for the slight pullback, but it was really just time for the major indices to take a breather. Not only did the S&P and NASDAQ finish on positive ground each of the first six sessions this year, but they also made new highs on each day. The Dow also had an impressive run, having only slipped a bit earlier this week.

By the closing bell, the NASDAQ was off 0.14% to 7153.6, while the S&P slipped 0.11% to 2748.2 and the Dow declined 0.07% to 25,369.1. Each of the indices started the day sharply lower and came well off their highs by the close.

“Like all good streaks, it had to come to an end. Even though it was a down day on paper it really wasn’t all that bad,” said Dave in Momentum Trader and Surprise Trader. “Still keeping my eyes on the prize this week which means I’m looking out to Friday. That’s when we first get a taste of some serious earnings reports, setting the stage for what could be a very important earnings season ahead of the us.”

The closeness of earnings season is likely a big factor in why the editors have been so quiet lately. There were no moves today in the portfolios. So that gives us a chance to appreciate a big double-digit performance from Healthcare Innovators. The highlights section below also includes a couple of portfolio excerpts on today’s tiny loss in the market and the reports from big banks that kick off the season on Friday.

Today’s Portfolio Highlights:

Healthcare Innovators: When Kevin added Epizyme (EPZM) back in June of last year, it was a largely speculative play on the company’s tazemetostat cancer drug. More than six months later, a report from Morgan Stanley says that this drug has proven to be effective in treating blood cancers and solid tumors with minimal toxicities in early and mid-stage trials. In addition to taking one more step toward “blockbuster” status, the news sent shares of EPZM soaring by 19.2%. On a down day for the market, that was easily the best performer of all the portfolios. In fact, it was more than three times the runner up.

Counterstrike: “Indices gapped down overnight as the bond market was spooked by a report that China is losing interest in U.S. Government bonds purchases. The report was from Bloomberg, so it is likely reliable. However, I find it hard to believe that America’s largest purchaser of bonds would completely stop.

“With bond prices slipping, maybe China doesn’t see bonds as the best investment and will shift a little money elsewhere. But considering the safe haven status, I would expect China to continue to be very active in the bonds market.

“While markets saw some selling off the open, buyers quickly stepped in and stocks finished down only slightly. The S&P closed down 0.11%, while the Nasdaq lost 0.14%.” — Jeremy Mullin

Insider Trader: “A little pessimism needed to come back into the markets, didn’t it?

“Although, even though stocks opened to the downside, they nearly finished the day in the green anyway. Whatever the reason, stocks can’t go up forever, although it sure feels like they could in 2018.

“The big story of the week will really be the big bank earnings that are expected out on Friday before the bell. We’ll hear from Wells Fargo and JP Morgan, among others.” — Tracey Ryniec

All the Best,
Jim Giaquinto

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