Morning Commentary
Tough day for investors on Monday.
Market breadth was obviously lopsided. Both the NYSE and the NASDAQ saw 580 advancing stocks against more than 2,400 decliners. Volume was even more worrisome as the down volume outpaced the up volume ten to one on NYSE, and more than five to one on the NASDAQ.
A rough start to the second-quarter as well, as the Dow slumped more than 700 points before the buy-on-dips crowd emerged. Still, the selling carnage was felt in every sector of the market.
S&P 500 Index |
-2.23% |
Consumer Discretionary (XLY) |
-2.82% |
Consumer Staples (XLP) |
-2.45% |
Energy (XLE) |
-2.03% |
Financials (XLF) |
-2.21% |
Health Care (XLV) |
-2.32% |
Industrials (XLI) |
-2.03% |
Materials (XLB) |
-2.23% |
Real Estate (XLRE) |
-1.22% |
Technology (XLK) |
-2.38% |
Utilities (XLU) |
-0.77% |
The key themes were uncertainty and a negative speculation over the unknown- things that may or may not happen. Yep, once again, headlines triumphed over real-life developments and trends.
Amazon is taking the biggest one-day point drubbing in its history after President Trump weighed in on its uneven deal with the U.S. Postal Service that belies the notion that there is little the White House can do about the retail giants positioning.
That being said, I think the stock is oversold. I don’t think a lot will be done, including a potentially big Internet sales tax. The bottom line is that in a couple of years, this will all be moot because of an ineffectual Congress; by then, Amazon will have established its own version of the U.S. Postal Service minus the dumb deals and losses.
Meanwhile, Facebook continues to get hit in the aftermath of its privacy fiasco that has Mark Zuckerberg saying it could take years to overcome. It remains to be seen if Zuckerberg is being too cute with his comments from more regulatory oversights to the depth of damage done to the company’s reputation, but I think he might want to be quiet for now.
The biggest loss in the tech sector, however, is in semiconductor stocks, which had been on fire in most of 2018, but they are getting slammed on reports that Apple (AAPL) might produce its own computer chips for Mac products by 2020. Yesterday, Intel (INTC) was the biggest percentage loser on the Dow.
I think the selling was excessive underscored by a late report from Stifel, Nicolaus & Company, which points out that Apple is less than 1% of the profits at Intel.
As for the trade battle with China, which intensified yesterday, there is no doubt it took a toll on retailers, which could be hit in the next salvo that would probably include consumer items from clothing to electronics. That’s why shares of Walmart (WMT) (instead of popping on bad news for Amazon) faced a bad day as well.
And then, there are products we export to China, including aircraft and construction equipment, that could fall victim to an accelerated tariff battle. Also, shares of Boeing (BA) and Caterpillar (CAT) are off on that speculation, but not large percentages as it’s unlikely they would be dragged into the trade battle fray unless all hope is lost.
I continue to believe there will be a last-minute deal with China since the country knows how high the stakes are, and how little room there is for error, given its grand ambitions and ghost cities.
The S&P 500 closed at 2,581, the same level as February 8th before a strong rebound. Of course, we are getting to the point where charts could become useless as the overall bias is clearly to the downside, and there isn’t a lot of news that could stem the tide between now and the jobs report on Friday.
I always say I like the market to be tested, and yesterday was a heck of a test.
Continue to reevaluate your portfolio but try not to make assumptions when in the long run, facts and fundamentals determine the share price.
Today’s Session
There will be an initial rebound, but the key for markets are the last thirty minutes of trading. Today is the last day of the week before we get an avalanche of economic data. I wouldn’t chase the open, but I’m imploring everyone to have their buy list and some cash prepared. We are sharpening our list and plan to ease into positions while adding to others into this period of weakness. If you are not already on our Hotline service, now is the perfect time to get started. Call your representative or email us at info@wstreet.com.
Comments |
Another home run - keep 'em coming El Zorro Oro on 4/3/2018 2:19:11 PM |
Very informative that Intel's profit in doing business with Apple is less than 1% of the profits at Intel. It was my number one question when I saw Intel's stock drop on news about Apple making own processors. Jack Blasius on 4/4/2018 9:09:42 AM |
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