The stock market began to sell off on Friday, but a lack of sellers on low volume meant there was little follow through. Investors were a little on edge with the Nasdaq today, with a notable downgrade on Apple (NASDAQ:AAPL), weakness in many semiconductor stocks and investors’ worries about whether the Federal Reserve will actually cut interest rates now. As a result, the Nasdaq slipped 78 basis points, closing near the key 8,100 level at 8,098.
Before Friday’s better-than-expected labor report, the market had been pricing in as much as a 50-basis-point cut in the Fed Funds rates. Consensus expectations still call for a 25 bps cut.
In any regard, all but removing the hopes for a 50 bps cut — there’s still a ~6% chance this month — is denting equities. Worth mentioning though is that the market is 100% pricing in some form of a cut. We detailed why this is important for tech stock specifically on Friday.
We won’t rehash that conversation. However, we will just say that, should the Fed opt to not cut rates — and remember, this is the same Fed that was way too hawkish in Q4 2018 — stock market investors will throw a tantrum.
Google-Dish to Battle the New “Big Three?”
Typically used in reference of Detroit’s three largest automakers, the “Big Three” of telecom very well could become AT&T (NYSE:T), Verizon (NYSE:VZ) and T-Mobile (NASDAQ:TMUS), assuming the latter is able to close on its acquisition of Sprint (NYSE:S).
However, part of getting the T-Mobile/Sprint deal approved requires divesting enough assets for a fourth large carrier to emerge. Short of working out a few of the details, it seems that Dish Networks (NASDAQ:DISH) will be the emerging player.
Rumors that Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) is considering teaming up with Dish were quickly squashed by the company. But it brings up an interesting point.
Surely investors will boo GOOGL getting involved in a capital-intensive business like telecom, no matter how strong its balance sheet is or how much free-cash flow such a business generates. Capital-intensive businesses generally come with a high valuation and dividend yield (which makes the Big Three of telecom and auto more similar than just the nickname). Want more? Rumors say former Ford (NYSE:F) CEO Alan Mulally is negotiating for Google in these alleged talks.
Speculation and potential coincidences aside, I don’t know that I believe GOOGL is considering such a move. That’s even with its Android operating system and its line of Pixel smartphones. But it wouldn’t be the worst way to pump life into its handset/smartphone business, even if it is capital intensive.
In any regard, shareholders would have a fit and the c-suite knows it.
Tesla Today
Tesla (NASDAQ:TSLA) made headlines — when is that not the case? — when its CEO Elon Musk opened up further about the automaker’s self-driving car plans.
One Twitter (NYSE:TWTR) user asked, “Do consumers have limited time left to buy a Tesla car since prices would have to go up severalfold to balance supply & demand once you solve FSD?”
Musk’s answer: Yes.
Of course, the next question then turns to solving FSD (full self-driving). Level 5 autonomous driving is no easy feat, and it’s hard to imagine that it will come into play to the point where consumers have to worry about how much time they have left to buy a Tesla vehicle near today’s prices.
Musk also said the company is working on launching new self-driving chips for older Teslas by the end of the year.
Last but not least regarding Tesla, Morgan Stanley analyst Adam Jonas stuck with his full-year vehicle deliveries forecast of 347,000. That’s below the company’s estimate of 360,000 to 400,000 and despite its second-quarter results of 95,200 came in ahead of consensus. Jonas also lowered his revenue estimates for Q3 and Q4, while maintaining a $230 price target and an equal-weight rating.
Other News in the Nasdaq Today
Apple was also in the analyst spotlight Monday, catching a downgrade to “sell” from “hold” at Rosenblatt Securities. The analyst has a $150 price target, implying about 25% downside. He believes that iPhone and iPad revenue will be disappointing in the second half.
Apple fell 2.06% on the day.
Finally, Broadcom (NASDAQ:AVGO) is apparently making progress on its deal for Symantec (NASDAQ:SYMC). The company is also apparently considering a purchase of the privately held Tibco, but the deal will be “sidelined” if the SYMC deal moves forward.
That seems to be the case on Monday, with AVGO reportedly making progress on securing the financing for the deal. An announcement could come later this month. In any regard, investors still aren’t happy about the news, pushing AVGO down 2.72% to roughly $275 on the day.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long GOOGL, T, AAPL and AVGO.
