If you look at the closing prices for the U.S. stock market indices, it looked like a quiet summer day in the stock market today. But under the surface, it was anything but on Wall Street.
A quick stock market recap: the S&P 500 fell 0.14%, while the Dow climbed 0.11% and the Nasdaq slipped 0.44%. The Russell was the worst performer, down 74 basis points.
Action in the Stock Market Today
Over the weekend, Barron’s published a piece called, “Sky-High Software Stocks Are Beginning to Look Like They’re Forming a Bubble.”
This hit many of 2019’s strongest stocks. Names like The Trade Desk (NASDAQ:TTD), Shopify (NASDAQ:SHOP), Roku (NASDAQ:ROKU), Veeva Systems (NASDAQ:VEEV), Okta Software (NASDAQ:OKTA), Yext (NASDAQ:YEXT), Twilio (NYSE:TWLO) and others.
It didn’t help that many of these names enjoyed a strong week last week and in particular, a strong Friday where the S&P 500 and Nasdaq both hit record highs.
These are market-leading stocks, so to see some profit-taking should come as little surprise — particularly with many of their earnings still a few weeks off. However, this week alone features about 1,400 earnings reports, as well as the Federal Reserve’s much-anticipated announcement on Wednesday. Investors expect a rate cut this week, likely for 25 basis points.
To see market participants get a bit defensive ahead of the announcement is normal. To be honest, it’s a better development for bulls to see stocks come down ahead of events like this, giving them room to rise afterwards.
Seeing utilities, healthcare, the VIX, leading dividend stocks, REITs, gold and other “safe” asset classes rise ahead of the Fed is reasonable. One could even argue that many of these assets benefit from a rate cut, too.
However, it will be very important to see how these high-octane growth stock react over the next few days and weeks. Do they bounce back and reclaim major levels to push higher? Do former levels and trends starting acting as resistance? These are the clues investors need to watch for to make sure they continue to lead the market higher or if they signal a change in tone.
(Here’s how to trade SHOP and VEEV, by the way).
Merger Monday
Merger Monday lived up to its name when Pfizer (NYSE:PFE) announced its all-stock deal with Mylan (NYSE:MYL).
Both companies issued their quarterly results on the day, with Pfizer reported a 1.6% decline in revenue and Mylan reporting a 1.3% gain. Can you tell the generic drug industry is struggling for growth?
The hope between the two companies is that a merger will create synergies, cut down costs and increase growth. The new entity, which will have a new name at some point, will be 57% owned by Pfizer shareholders. The other 43% will belong to Mylan shareholders.
More of Today’s Stock Market News
Apple (NASDAQ:AAPL) will report earnings on Tuesday after the close. However, yet another firm has felt the need to issue a bullish report. JPMorgan analysts have an overweight rating on the stock and a $239 price target, implying almost 14% upside from current levels. They believe Apple will top consensus expectations for revenue and earnings, and believe it will have three 5G iPhones next year.
Starbucks (NASDAQ:SBUX) received a pair of downgrades Monday morning, after nearly hitting $100 per share on Friday. The stock, which we said has been a bit too hot, was cut to neutral at both JPMorgan and Baird. The former has a $91 price target, while the latter has a $98 target.
Goldman Sachs initiated coverage on Chipotle Mexican Grill (NYSE:CMG), slapping a buy rating on the stock with a $1,000 price target. They also put the stock on its conviction buy list.
Shares rallied over 3% in response, but many are asking, where the heck have these analysts been? Shares are now up 71% over the past year and almost 90% so far in 2019. From current levels, the analysts still expect almost 25% upside.
Finally, Tesla (NASDAQ:TSLA) closed near session highs, up 3.4%, after CEO Elon Musk said Tesla car owners will soon be able to stream Netflix (NASDAQ:NFLX) and YouTube. That would be a pretty cool and interesting development in the auto world. The stock is bouncing perfectly from the 50-day, where it was laid out as a trade last week on InvestorPlace’s Top Stock column.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL, TTD, SHOP, ROKU and YEXT.
