FAANGs Plummet, Banks Look to Summit
It was a good day for the Dow, though the floor came out from beneath the NASDAQ as the tech heavy index saw its worst trading day in 3 months. All-in-all, trading was mixed. Trading opened to the tune of reports about North Korea’s intercontinental ballistic missile which can reach anywhere in the U.S., along with news about a preliminary understanding between Britain and its EU counterparts. What weighed on the tech-heavy NASDAQ was a strong selloff in megacap tech stocks. The question is, “Is this a mere rotation or have tech stocks lost their lustre?!”
Facebook (FB) tumbled 4%, Amazon (AMZN) plunged 2.71% and Apple (AAPL) shed 2.07%. Netflix (NFLX) toppled 5.54% and Google parent, Alphabet (GOOG), lost 2.46%.
Schroders investment strategist, Jonathan Mackay, weighed in on the question, noting, “What we’re seeing is a combination of defense positioning, with people taking some profit out of the high-growth areas, technology specifically, and rotating into sectors that should hold up better if we get any negative news on tax bill or the debt ceiling.” Wedbush Securities equities division head, commented, “Since so many portfolios had the same positions and are rebalancing, what we are seeing is a mini unwind of momentum stocks. It is difficult to say whether it will spill over to the rest of the market at some point.”
Banks, on the flipside got a boost from the revised Q3 GDP reading. Albeit in line with expectations, the growth rate was raised to 3.3% from the previous governmental reading of 3%. The Dow was led higher by banks like J.P. Morgan (JPM), which rose 2.34%, and Bank of America (BAC), which tacked on 2.32%.
Janet Yellen, in what was likely her last hearing before the Joint Economic Committee of Congress, took an upbeat tone. She did note that a strengthening economy mandates more rate hikes, necessary to keep inflation in check. Jerome Powell just the day before remarked that the case was coming together for a December hike. The positive assessment by the two could be responsible in large part for banks’ strength, bank stocks now catching up with the Fed’s bullish rate hike stance. U.S. 10-year and 30-year bonds also hit two week peaks on the encouraging comments.
On to the political front, we could very well see a lot of movers and shakers in today’s markets with the possibility that the tax bill will go to vote in the Senate as early as today! The bill has a lot of clauses from lowering corporate tax rates to allowing corporate behemoths with huge cash stores overseas to repatriate their earnings at a lower tax rate. Proskauer Rose tax lawyer, David Miller, underscored the going wisdom: “A tax deferred is a tax avoided.” Apple has more than $128 billion offshore. With corporate America claiming that some $3 trillion in earnings were made offshores in places like Bermuda and Grand Cayman, a tax bill today or in the near future would certainly benefit not only Apple, but other corporate titans like GE, Google and Pfizer.
Autodesk (ADSK) took the gold for the biggest loser on the S&P 500, nosediving over 16% after its forecasts came out beneath estimates, the company also adding that it’s anticipating restructuring charges.
The restaurant chain, Chipotle (CMG) rose 4% after it said it would be on the lookout for a turnaround expert to replace company founder and Chief Executive, Steve Ells. Allergan rose 4.15% on a Morgan Stanley upgrade.
On the macro front, pending-home sales rose 3.5% in October. At the same time, they came out 0.6% lower than a year ago.
Today’s Economic Calendar: Initial jobless claims and personal income and outlays will be released at 8:30 N.Y. time, the Chicago PMI coming out at 9:45. The EIA natural gas report will be released at 10:30, with the Fed balance sheet coming out at 4:30.
Thursday’s Hot Stocks: BOX, JACK, JNPR, SMTC
Have a great trading day!
|Monday||10:00||New Home Sales||620 K||Medium|
|Tuesday||9:00||FHFA House Price Index||0.6 %||Medium|
|Tuesday||9:00||S&P Case-Shiller||0.4 %||Medium|
|Tuesday||10:00||Consumer Confidence||240 K||High|
|Tuesday||10:00||Jerome Powell Speaks||–||High|
|Wednesday||10:00||Janet Yellen Speaks||–||High|
|Wednesday||10:00||Pending Home Sales Index||1.0 %||Medium|
|Thursday||8:30||Jobless Claims||240 K||Medium|
|Thursday||8:30||Personal Income and Outlays||0.3 %||Medium|
|Friday||9:45||PMI Manufacturing Index||54.5||Medium|
|Friday||10:00||ISM Mfg Index||58.4||High|
|Friday||10:00||Construction Spending||0.5 %||Medium|
|TECD||Tech Data Corporation||PM||Monday|
|MRVL||Marvell Technology Group Ltd.||PM||Tuesday|
|PSTG||Pure Storage, Inc.||PM||Tuesday|
|NUAN||Nuance Communications, Inc.||PM||Tuesday|
|TIF||Tiffany & Co.||AM||Wednesday|
|RY||Royal Bank of Canada||AM||Wednesday|
|GWRE||Guidewire Software, Inc.||PM||Wednesday|
|JACK||Jack in the Box Inc.||PM||Wednesday|
|GLNG||Golar LNG Limited||AM||Thursday|
|DCI||Donaldson Company, Inc.||AM||Thursday|
|KR||The Kroger Co.||AM||Thursday|
|ULTA||Ulta Beauty, Inc.||PM||Thursday|
|FIVE||Five Below, Inc.||PM||Thursday|
|BIG||Big Lots, Inc.||AM||Friday|
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