Afternoon Market Briefing for the 9th of July 2019

Mega-cap tech stocks gain

The stock market trades mixed today with mega-cap technology stocks pushing the Nasdaq Composite (+0.4%) higher, while the Dow Jones Industrial Average (-0.3%) underperforms. The S&P 500 trades just below its flat line as it holds steady after a big stretch of gains. 

Investors haven’t shown much conviction in the broader market, which isn’t too surprising considering that potential market-moving news is around the corner. Fed Chair Powell’s semiannual testimony on Capitol Hill begins tomorrow, and the Consumer Price Index for June will be released on Thursday. These events could adjust the market’s rate-cut expectations for the July 30-31 FOMC meeting. 

Currently, the S&P 500 consumer discretionary (+0.4%) and communication services (+0.3%) sectors have received solid support from shares of Amazon (AMZN 1984.50, +32.18, +1.7%), Facebook (FB 199.42, +3.69, +1.9%), and Netflix (NFLX 383.34, +7.18, +1.9%). Today’s laggards include the materials (-1.1%), consumer staples (-0.8%), and industrials (-0.5%) sectors.

Material and industrial stocks remain under pressure after German chemicals company BASF issued an earnings warning yesterday, citing weakness in the North American agricultural sector and weaker-than-expected industrial production. 

Macroeconomic pressures contributed to RBC Capital Mkts downgrading industrial conglomerate 3M (MMM 164.84, -4.34, -2.6%) to Sector Perform from Outperform. 3M is also facing some company-specific issues, though, and its underperformance today has undercut the Dow and the industrials sector. 

PepsiCo (PEP 131.12, -1.44) beat earnings estimates, but shares currently trade lower by 1.1% as shares pull back from recent all-time highs. 

In M&A news, Acacia Communications (ACIA 64.94, +16.87, +35.1%) will be acquired by Cisco (CSCO 56.39, +0.20, +0.4%) for $2.6 billion, or $70 per share, in cash. The deal represents a 46% premium to ACIA’s closing price on Monday. Elsewhere, Wall Street firm Piper Jaffray (PJC 73.08, -0.81, -1.1%) agreed to merge with Sandler O’Neill and Partners.

Reviewing today’s economic data, which included NFIB Small Business Optimism Index for June and the JOLTS – Job Opening report for May.

  • The NFIB Small Business Optimism Index for June decreased to 103.3 from 105.0 in May.
  • The May Job Openings and Labor Turnover Survey showed that job openings decreased to 7.323 million from a revised 7.372 million (from 7.449 million) in April.
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