Mid Day Briefing 8th of July 2019

Midday Summary: Stock market pulls back amid weakness in Apple

The stock market is down today, dragged lower by many of the technology stocks in the underperforming Nasdaq Composite (-1.0%). The S&P 500 is down 0.6%, the Dow Jones Industrial Average is down 0.6%, and the Russell 2000 is down 0.8%. 

Apple (AAPL 199.88, -4.34, -2.1%) has been an influential laggard in the market, and the S&P 500 information technology sector (-0.9%), after the stock was downgraded to Sell from Neutral at Rosenblatt. AAPL was also added to Needham’s Conviction Buy list, but the former recommendation has outweighed the latter, reflecting the market’s bias toward negative news. 

Similarly, Friday’s solid jobs data continues to dampen lingering hopes for a 50-basis points rate cut at the July 30-31 FOMC meeting. The consensus view in the market, however, remains that the Fed will still cut the fed funds rate by 25 basis points.

It appears that bad news is leaving buyers unconvinced at a time when stock valuations are at near record highs. According to Bloomberg, Morgan Stanley reduced its global equities allocation to its lowest level in five years and downgraded its recommendation to Underweight from Equal-Weight, citing a poor outlook for equities over the next three months. 

Investors haven’t been running for the door, though, cognizant that earnings season begins in earnest next week and that a host of Fed officials are slated to speak this week. Fed Chair Powell will make three appearances, including two days on Capitol Hill for his semi-annual monetary policy testimony Wednesday and Thursday. 

Today, the S&P 500 health care sector (-1.1%) has also exerted additional pressure on the market amid broad-based selling. The S&P 500 energy (+0.3%) and real estate (+0.3%) sectors have provided offsetting support as the only sectors trading higher.

In other corporate news, shares of Boeing (BA 350.23, -5.63, -1.6%) have been pressured by news that a Saudi airline backed out of a $5.9 billion 737 Max order in favor of Airbus. NetApp (NTAP 59.98, -2.43, -3.9%) underperforms as one of the many stocks that were downgraded today. Citigroup downgraded NTAP to Sell from Neutral with a price target of $55. 

U.S. Treasuries are little changed. The 2-yr yield is up one basis point to 2.88%, and the 10-yr yield is down one basis point to 2.04%. The U.S. Dollar Index is up 0.1% to 97.36. WTI crude is up 0.5% to $57.78/bbl. 

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