Home » Stocks Show Their Might Led by Chips and Biotech – The Daily Rundown

Stocks Show Their Might Led by Chips and Biotech

Stocks Show Their Might Led by Chips and Biotech – The Daily Rundown



Stocks Show Their Might Led by Chips and Biotech – The Daily Rundown

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

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We surely didn’t get the breakout I was looking for today, but we sure did get an exciting trading session, that told us about the market’s current state of mind. If this had been February, I think word of tensions with North Korea, or President Trump pulling out of a meeting with the leader of North Korea would have sent the market reeling lower by 1.5 to 2 percent on the S&P 500. But this is May and spirits seem much brighter.


Equities indeed sold-off following the news President Trump was calling off the summit with Kim Jung-Un of North Korea in June. The S&P 500 had an initial knee-jerk reaction taking it down about 1 percent by 11 AM. But the rest of the day was about price recovery, and by the close, the S&P 500 finished down about 20 bps, while the NASDAQ recovered all its losses to finish essentially flat. That is impressive, and I think it tells us a lot about the state of mind for the market. What had been a weak market just a few short weeks ago, seems to have become more confident.

^SPX Chart

^SPX data by YCharts


Risk-on Leadership

Like I wrote yesterday, we saw leadership prevail from the key players, with chips and biotech’s up on the day by nearly 40 bps, the risk-on sectors of the markets. Yes, Utilities rose by 80 bps on the day, but that has more to do with yields falling, with 10-year yields down to 2.98 percent, from 3.10 a week ago.

Chips mounted a rally, from down 80 bps at 11 am, to up 34 bps by the close, a significant recovery. What stocks led, well the usual suspects, Micron up 2.6 percent and now at $61.50, followed by AMD up 2.0 percent, On Semi up 3.6 percent, and Broadcom up 1.3 percent.


Micron

The advance in Micron continues to be impressive, shares are nearing a very big breakout, sitting right at resistance at $61.50. If it can manage to advance tomorrow, then it might still have some further to go, and $61.50 should offer support in the future should it climb and retrace.

Should Micron break out tomorrow and rise above its 52-week high of $63.42, then it may be on a trip towards $73, a price not seen in nearly two decades, back to the year 2000! Yes, a break out for Micron is a huge deal.

The bears will argue the DRAM pricing cannot stay strong, and Micron’s recent revenue and earnings surge cannot last, while the Bulls say the opposite.

Based on estimates to the year 2020, analysts are forecasting flat revenues and declining earnings, the street seems to believe the good times can’t last, which means Micron’s stock can continue to climb should it keep putting up strong results because a positive outcome is not baked into the stock.


Netflix

As noted yesterday, Netflix broke out, and it continued today with shares reaching an intraday high of $353. Some in the media were talking about Netflix now having a market cap just barely higher than Disney’s and Comcast, at $152.14 billion to Disney’s $152.03 billion, and Comcast at $145.78 billion. Most of that has to do with the fact that Comcast is nearly down 20 percent on the year.

DIS Market Cap Chart

DIS Market Cap data by YCharts

Plus, my knee-jerk reaction, why shouldn’t Netflix be worth more, aren’t Comcast and Disney trying to become like Netflix? Isn’t that why Disney is launching a direct to the consumer product. Isn’t that why Comcast is trying to steal Fox’s assets away from Disney? Of course, it is. Comcast and its cable line will be worthless in another few years when Verizon and the other wireless players launch 5G, and cord cutting start to accelerate at an even faster pace.

Imagine a world, where one day like your phone and your tablet, your TV will be able to access data, but not through wifi, but your wireless provider. It sounds crazy, but how hard could it be?

Why else would Comcast be so hot to get Fox? They want to keep building up their content library and become a content business.

-Mike


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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags: #netflix #micron #comcast #disney #amd #broadcom #biotech #chips #stocks #sp500