On Friday, stocks exploded higher, erasing any doubt about its current trajectory. Of course, it helps that the market was reacting to a robust jobs report for the prior month. It was not as rosy of a session in the stock market today, with the SPDR S&P 500 ETF (NYSEARCA:SPY) shedding 0.31% on Monday.
Just because the markets didn’t go up though, doesn’t mean it was a disaster. Instead, investors were simply working off Friday’s big gain, while at the same time growing more cautious around China.
That much is evident by the rise in the CBOE Volatility Index (VIX) on Monday. While the SPY fell just 31 basis points, the VIX erupted 15% on the day. That says something.
China
Dec. 15 is just six days away, but it’s a significant day in many investors’ mind. It’s when the U.S. may or may not implement further tariffs against China, given that phase one of the current trade agreement still hasn’t been signed.
It’s pretty simple stuff, really. Either sign the deal or risk further escalation. Of course, there are endless trade-related headlines pouring out of news outlets, unnamed sources, the White House and even President Donald Trump himself.
Should the U.S. elect to raise tariffs, it could have ramifications on Wall Street as well. Given that possibility, it’s no wonder the VIX is rallying.
Over the weekend, some news of out China began to rock the boat a bit and could have implications for major U.S. companies such as Dell (NYSE:DELL), Microsoft (NASDAQ:MSFT) and HP (NYSE:HPQ).
China is ordering all state offices to remove foreign software and hardware within the next three years with hopes to increase domestic industry. It’s estimated that Beijing will to replace up to 20 million government agency computers with domestic products throughout these next three years, with the hope being that China won’t have to rely on foreign tech.
Movers in the Stock Market Today
Disney (NYSE:DIS) is on a roll, hitting $10 billion in the global box office for 2019. The achievement was notched this weekend after Frozen 2 pulled in another $125 million. Plus, Disney’s still expected to gross another $500 million before the end of 2019 with the anticipated Star Wars release.
As for record, Disney already holds that too. In July, Disney broke the previous record of $7.6 billion back in 2016.
Morgan Stanley (NYSE:MS) will reportedly ax about 2% of its workforce, mostly in tech and operations. 2% of its workforce won’t necessarily rock the unemployment office. But the company’s catalyst could be a reflection of both Wall Street and other firms worldwide. The uncertain global outlook is the company’s reasoning.
It’s one more thing that, potentially, could be cleared up with a trade war agreement.
Earlier this year, Microsoft won the JEDI contract with the Pentagon, which is expected to span 10 years. Amazon (NASDAQ:AMZN) continues to dispute the Pentagon’s choice to select MSFT for the role. The company believes it lost the decision because of its political standing with the White House.
The contract is expected to be valued at around $10 billion over that time frame, and while that’s not necessarily a game-changer for Microsoft and its $1 trillion market capitalization, some analysts believe it could act as a catalyst for a positive ripple effect down the road.
Heard on the Street
Morgan Stanley initiated Virgin Galactic (NYSE:SPCE) with a new “overweight” rating and slapped a $22 price target on the stock. Shares erupted almost 16% on the day in response.
Goldman Sachs cut Macy’s (NYSE:M) to “sell” with a $12 price target. From Friday’s close, the target implied about 20% downside. Although shares opened lower on the day, they ended higher by about 2%. How about that action?
HSBC put a price target of $40 on JD.com (NASDAQ:JD) to go along with their new “buy” rating.
Bank of America/Merrill Lynch came out with a double-double upgrade. It might sound like an order at In-N-Out, but instead of burgers, these analysts are bullish on chips.
They upgraded Skyworks Solutions (NASDAQ:SWKS) and Qorvo (NASDAQ:QRVO) to “buy” from “underperform.” For SWKS, they bumped their price target to $122 from $92 and for QRVO, they went to $130 from $80.
Why such a big upgrade and significant boost their price targets? The analyst is bullish on 5G adoption, which could drive significant growth for component companies like SWKS and QRVO.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long DIS.
