April 3, 2018

As we had warned yesterday, if the tech sector starts falling, we’re in for trouble! And that’s just what happened yesterday. The market has given big tech names a cold shoulder, from Apple to Facebook – and yesterday, it was consumer discretionary stocks like Amazon that got swept up in the carnage.

For Apple, it’s perhaps no longer the market’s lovechild. Facebook has taken more than one step back after revelations pointed to it colluding on behalf of Trump’s election campaign by compromising users’ private data.

Tesla (TSLA) was another stock in the limelight after its almost bigger than life CEO, Elon Musk, decided to make an April fool’s joke of tweeting that Tesla is heading to bankruptcy. Its stock didn’t take lightly to the joke, falling 5.13% on the day. Musk’s tweet: “Tesla Goes Bankrupt Palo Alto, California, April 1, 2018 — Despite intense efforts to raise money, including a last-ditch mass sale of Easter Eggs, we are sad to report that Tesla has gone completely and totally bankrupt. So bankrupt, you can’t believe it.”

TSLA, likewise, seemed to defy the National Transportation Safety Board, releasing detailed info about the accident prematurely. TSLA is off 22% on the year.

Amazon (AMZN) also faced a firestorm, but rather from President Trump, who seems to have a vendetta against the company.

Market Summary: All of the major indexes ended off. The S&P 500 and the Dow dropped close to 2%, the NASDAQ taking the jackpot with losses of 2.75%.

We’re still seeing concern about erratic and unpredictable trade policy which certainly encumbers and weakens the call for gains. On the S&P 500 all 11 sectors ended off; 8 ended down by over 2%. Tech and as noted, consumer discretionary stocks were hardest hit. Now, the NASDA is within a hair of correction territory. Correction territory means a security/index has fallen 10% from its latest peak.

As for the averages, the S&P 500 closed below its 200 period EMA. The last time that happened was after Brexit. On the 30-member Dow Jones, only UnitedHeath Group managed to end up, the others succumbing to downward pressure.

Yesterday was also the start of the second quarter. Volatility was high, continuing the tradition of late. With that said, history has shown April to be strong.

China, in retaliation, spearheaded a tariff program of its own, making a trade war all the more feasible and realistic. The tariffs China slapped on were very diverse, the penalties spanning from pork to fruit. And the domestic sphere isn’t getting any easier. Trump has been targeting Amazon for using the U.S. Postal Service after its runs.

On the economic front, Markit’s manufacturing PMI reached a 3-year high of 55.6 in March. The ISM manufacturing report saw a downtick from 60.8 to 59.3. Construction spending rose slightly in February. Haverford Trust Co. CIO Hank Smith, noted, “Today’s weakness has everything to do with China’s announced tariffs. Even though they were quite small, there’s a fear that this could escalate. We don’t know if this could be the end as far as retaliation goes, but it seems like the trade issue is escalating into bite and not just bark.”

In other company news, Humana (HUM) took off 4.4% after the WSJ reported that WMT was looking to buy the company. On the flipside, Alkermes PLC (ALKC) toppled 22% after the FDA sent it a “refusal to file letter” regarding its new depression treatment. On the tech front, Google (GOOGL) tumbled 2.4%, Microsoft, 3.01% and Intel (INTC) shed 6.1%. Intel tumbled on news that Apple would start making its own chips, giving Intel reason fret given the sheer size of Apple’s orders.

Another consumer discretionary stock, Netflix (NFLX) took a big hit. It fell 5.1% yesterday, but is still up 40% on the year.

Tuesday’s Hot Stocks: CGIX, CVV, CBS, VIAB, SWCH

Have a great trading day!