U.S. equities moved lower on Monday in relatively quiet trading, as investors focused on rising political risks at home and overseas.
Here at home, President Trump rattled the cages in Washington with an attack through Twitter Inc (NYSE:TWTR), accusing President Obama of wiretapping his phones during the campaign — echoing President Nixon and the Watergate scandal that used state intelligence assets for political gain. In Europe, the rise of anti-globalist candidates in France and elsewhere fuels worries about the long-term viability of the Eurozone.
In the end, the Dow Jones Industrial Average lost 0.2%, the S&P 500 gave back 0.3%, the Nasdaq Composite lost 0.4% and the Russell 2000 dropped 0.7%. Treasury bonds were mixed, the dollar was slightly higher overall, gold was little changed and oil was weaker on China growth concerns balanced against Iraq’s statement that OPEC production cuts may need to extend into the second half of the year.
Energy stocks led the way with a 0.3% gain while materials and financials were the laggards, down 0.7% and o.6%, respectively.
Netflix, Inc. (NASDAQ:NFLX) gained 2% on an upgrade from analysts at UBS noting upside to Q1 subscriber guidance with momentum coming despite a light release schedule of exclusive content.
New offering Snap Inc (NYSE:SNAP) fell 12.3% after a cautious Barron’s article following last week’s big rally called shares so “ridiculously valued” that when even factoring in aggressive growth projections (the company isn’t profitable), it’s hard to justify more than half the current stock price. Action camera maker GoPro Inc (NASDAQ:GPRO) fell 7.9% after being downgraded to “sell” from “neutral” at Goldman Sachs, noting increased competition, product rollout issues and a high cash-burn rate.
Turning back to Trump, aside from ongoing Russia hacking/influence accusations from democrats (largely unfounded) and the Obama wiretap/”deep state” leaking accusations from Trump and republicans (also largely unfounded), the political divide is deepening. This threatens the post-election narrative that Trump’s tax reform, stimulus spending, and deregulation plans would breeze through Congress and boost GDP growth this year.
Moreover, Trump today signed a second version of the anti-terror, non-visa travel ban from a handful of majority-Muslim countries in the Middle East, including Yemen and Syria — something that will surely result in more political bickering.
Amid all of this, the Federal Reserve is poised to raise interest rates again next week, Q1 GDP growth is being marked down and “hard” economic data continues to come in weak.
After rising triumphantly above the Dow 21,000 level last week, on extremely narrow breadth and extreme bullish sentiment, stocks look vulnerable to a long-delayed pullback. Remember: The last 1% loss in large-caps was back in October.
I continue to recommend targeted short-side positions, such as the March $100 Nvidia Corporation (NASDAQ:NVDA) puts that are up nearly 90% for Edge Pro subscribers.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
