It was a really challenging session on Tuesday for the market, which took a turn for the worse when the Senate healthcare bill couldn’t even get procedural votes, and the July 4th deadline was lifted. By the end of the day, most Republican senators were at the White House as President Trump leaped into the mix to push for a resolution.
Although President Trump said there was “no choice” but to solve the problem as the current “situation was melting down,” he seemed to admit there is a chance nothing happens. At issue is a band of conservatives, including Cruz, Lee, Paul, and R. Johnson, pushing for free-market solutions and less government. They are not happy with the following:
- Exchanges
- Stability Fund
- Subsidies
On the other side; moderate senators, including Collins, Capito, Heller, Portman, and Moran are unhappy with the following:
- A slower rate of spending for Medicare
- Not enough money for rural medical care
- Not enough money for opioid treatment
The last-minute addition of a penalty for going 63 days without healthcare insurance is a de facto mandate. It also underscores the fact that for any plan to be successful, it must have younger people buying insurance. This is why lawmakers must take heed if they are going to pay insurance companies $50.0 billion for stability; they better demand bare-bones plans that younger and less well-off folks can afford.
This is a mess because the GOP blinked when it was time for a true repeal; whatever we get might be better than Obamacare, but still, Frankenstein’s monster.
Tech Wreck?
It was a horrific day for technology as well. Investors were greeted yesterday morning with news Google/Alphabet (GOOGL) has been assessed a $2.7 billion fine by the antitrust European Union (EU) regulators. The Street knew a fine was coming, but conventional wisdom held that it would be one billion dollars.
For decades, the EU has been tough on American technology companies. However, this fine is seen as an egregious blow that went well beyond unfair business practices. When it’s all said and done, Google will probably pay the fine. The news made Google the biggest loser among Big Tech, but none escaped the session unscathed:
- GOOGL -2.6%
- AAPL -1.3%
- AMZN -1.8%
- FB -1.9%
So, after reversing lower yesterday, the S&P Technology sector (XLK) closed at the low in back-to-back sessions. That’s ominous and yet, this all happened in news, and the scuttlebutt does not have anything to do with underlying fundamentals. There is the issue of tech having enjoyed an almost unstoppable ride for a very long time:
- YTD +14%
- 52 Weeks +33%
- 3 Years +41%
Avoiding Regret
Buying the dip for the last several years has been virtually foolproof. Heck, I regret 99% of the positions I sold. The irony is those that initially sold off - and made me feel like a genius - have subsequently rallied the most.
This is the dilemma for many investors. The operative word is ‘investor.’ If you are a trader, then you should be nimble. That said, it’s okay to take profits even as an investor; make sure you do it as a part of changes in the investment proposition, and not as a part of the herd.
Actionable Key Parameters
Obviously, there are cracks in the armor of tech. Today, look for 54 as key support and volume for signs of panic on the upside. A close above 56.50 is your buy signal.
Another issue with yesterday’s session was rotation out of tech into other sectors that faded midday as more money started to seek the comfort of the sidelines. Only banks, riding comments from the European Central Bank (ECB) and Janet Yellen, were higher. Europe’s economy is coming on strong, and Yellen says there will never be another financial crisis in the lifetime of anyone watching my show.
S&P 500 Index | -0.81% |
Consumer Discretionary (XLY) | -0.79% |
Consumer Staples (XLP) | -0.86% |
Energy (XLE) | -0.17% |
Financials (XLF) | +0.50% |
Health Care (XLV) | -0.91% |
Industrials (XLI) | -0.75% |
Materials (XLB) | -0.61% |
Real Estate (XLRE) | -0.40% |
Technology (XLK) | -1.64% |
Utilities (XLU) | -1.12% |
After the bell, we got earnings from KB Homes (KBH), which beat the Street on revenue and earnings as operating income rose 91%, and earnings per share more than 100%. The initial reaction saw the stock edge higher. Also, API inventory numbers saw petroleum build in key segments, which will put extra pressure on today’s governmental number to show drawdowns if crude is to continue to rebound this week.