There are a lot of reasons to get defensive, although the action in the stock market today may not have investors thinking that way.
Overnight futures indicated another higher open for stocks on Monday. That looked likely to pan out until reports hit the wire that Chinese officials are less confident in a trade deal being struck.
Trade War Worries Back?
Here’s this morning’s news: “Mood in Beijing about a trade deal is pessimistic due to U.S. President Donald Trump’s reluctance to roll back tariffs.”
On Friday, the markets surged to new all-time highs, as investors continue to bid the market higher and higher. The CBOE Volatility Index (VIX) remains below $13 and the bulls won’t even allow for a mild pullback — even though a number of them would like one.
So you can see why stocks opened lower on Monday after a headline like that. After all, much of the recent gains can be attributed to positive sentiment. The jobs data, lower interest rates and an expected phase-one trade deal between the U.S. and China have helped springboard equities higher — with the exception of small-cap stocks.
If trade tensions increase or the phase-one deal comes undone, stocks will pay that price. That said, investors aren’t buying into the headlines all that much. They bid stocks up from the lows on Monday so the major averages finished near flat on the day.
It pays to be cautious, but don’t panic on every little headline. See how the market digests the news. Price action is what you should follow, not the headlines.
Mergers, Acquisitions and IPOs
Despite all of the unrest that’s been going on in Hong Kong, Alibaba (NYSE:BABA) has been forging ahead with a secondary listing. According to reports, the company had to stop taking orders early, as demand is apparently robust. The offer price will be set on Wednesday, based on Tuesday’s closing price from the New York Stock Exchange, and shares should begin trading on Nov. 26.
When Alibaba went public on the NYSE back in 2014, it raised $25 billion in the deal. That’s the largest IPO to date. However, Saudi Aramco may pass that figure when it IPOs. The company is looking to raise $24 billion to $25.6 billion when it goes public, selling an equity stake of just 1.5%. The oil giant is looking to garner a valuation between $1.6 trillion and $1.71 trillion, below the targeted $2 trillion mark.
Xerox (NYSE:XRX) shares hit new 52-week highs on Monday, after HP (NYSE:HPQ) turned down the company’s acquisition offer. That’s likely as bulls look further for some type of merger or acquisition attempt by HPQ.
This is a very interesting story.
HPQ was initially looking over XRX for a possible acquisition. Before concluding its findings though, Xerox made an offer to purchase HPQ. That’s despite HP having a market capitalization of almost $30 billion and Xerox sporting a market cap of just $8.5 billion. Now that HPQ has turned it down, it’s anyone’s guess on how these two will finagle the deal.
It’s worth noting that Carl Icahn owns a stake in both companies, so getting a deal together is most certainly still on the table.
Movers in the Stock Market Today
Amazon (NASDAQ:AMZN) is expanding its free ad-supported music offering. After launching in April for customers with an Echo device, Amazon’s ad-supported music will now be available via the Amazon Music app on a variety of smartphone operating systems and the Amazon FireTV.
The bulls keep on coming for Advanced Micro Devices (NASDAQ:AMD). Shares hit $39.98 in Monday’s trading session, but $40 may not be the ceiling. Last week, AMD got a $50 price target and on Monday Cowen analysts assigned a $47 price target. The company has a stable road map and consistent execution, they argued.
Despite Ford (NYSE:F) announcing the Mustang Mach-E, Tesla (NASDAQ:TSLA) investors don’t seem too rattled, with shares slipping just 0.6% on the day. The vehicle is expected to accelerate from 0 to 60 miles per hour in the mid-three second range and achieve a driving range of 210 to 300 miles. The vehicle will likely cost between $43,895 and $60,500 before a federal tax incentive of $7,500.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.