Monday might have been a sleepy session, but on Tuesday, we fell out of bed. We had a mega biotech deal to shake things up, while stocks continue to fluctuate ahead of the G20 meeting. So what led to the roughly 1.5% drop in the Nasdaq today?
Sorting Out the Macro
We said it the other day, but it bears repeating: Investors are not navigating a normal period of time. The market is pricing in a rate cut while the economy seems mostly fine and stock markets hover near all-time highs.
That said, recent housing data was disappointing, consumer confidence slipped to a multi-year low and while it seems forgotten, the jobs report earlier this month was a major miss.
Fed Chairman Jerome Powell held a press conference on Tuesday, one that investors were tuned into to see whether they could get any hints about a rate cut, but Powell held firm. Instead, he pushed back against “criticisms” from the White House, saying that the Fed is insulated from short-term political pressures for a reason.
This also comes just a few days ahead of the G20 summit, where investors are hopeful that the U.S. and China can take some meaningful steps toward a trade deal. Trump and President Xi will reportedly meet on Saturday — setting up a potentially large move for next week.
That could have a huge impact on the Nasdaq, particularly for semiconductor stocks. It will also affect those that generate revenue from China and Asia or have production setup in the region.
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Winners in the Nasdaq Today
The biggest winner in the Nasdaq today? Biotech. Last week we highlighted the strength in this group and Monday’s $63 billion merger only adds to recent gains. AbbVie (NYSE:ABBV) is scooping up Allergan (NYSE:AGN) in a $63 billion cash-and-stock deal. AGN rallied 26%, while ABBV fell 15%.
The move is driving names like Biogen (NASDAQ:BIIB), Mylan (NASDAQ:MYL) and others higher on the day on above-average volume.
Other than that though, there weren’t a lot of winners in the Nasdaq today. I guess you can count the names that held up to the selling. Stocks like Starbucks (NASDAQ:SBUX), KLA-Tencor (NASDAQ:KLAC) and Walgreens (NASDAQ:WBA), all of which closed higher on the day.
Losers in the Nasdaq Today
The column could cover today’s losers and be a two-part series. It was a tough day in tech, particularly for those in momentum names. Sellers continue to pile onto what were red-hot momentum stocks that are suddenly cooling off.
Names like Shopify (NASDAQ:SHOP), which fell over 8%, as well as Roku (NASDAQ:ROKU), Trade Desk (NASDAQ:TTD), Twilio (NYSE:TWLO) and others all took it on the chin Tuesday.
Chinese tech stocks were also hit hard. iQiyi (NASDAQ:IQ), Baozun (NASDAQ:BZUN), Baidu (NASDAQ:BIDU) and Huya (NYSE:HUYA) were all hit hard as sellers punished Chinese equities.
Microsoft (NASDAQ:MSFT) finally pulled in a bit, with shares falling over 3% on the day. The stock had been hitting new high after new high, but profit-taking finally got the best of it. MSFT shares are now resetting and here’s where it may find support.
Other large-cap tech names were down alongside Microsoft. The whole FANG group — Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) — all declined roughly 2% to 3% on the day.
Adobe Systems (NASDAQ:ADBE) was clocked by more than 4% too. After ripping higher last week on solid earnings, shares were under pressure Tuesday, likely for the same reason that MSFT stock fell so much: profit-taking. See if this key level can act as support.
Bottom Line on the Nasdaq Today
There’s no other way to put it: the Nasdaq got punched in the face on Tuesday. Honestly though, seeing the index come down a bit after launching higher over the past few weeks is constructive. I was leery about going into the G20 summit with the market on its highs. With this action though, investors are going into the event lower. That helps lower expectations and keep investors from being too disappointed if there’s no trade progress. A trade-war escalation will not be good, though.
This price action is somewhat painful in the short term. However, it’s better for keeping the bull market intact over the long term.
On the earnings front, remember we have quarterly reports from Micron (NASDAQ:MU) after the bell and BlackBerry (NYSE:BB) on Wednesday morning.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long ROKU, SBUX, AMZN and GOOGL.
