Dow Jones futures fell Monday morning, along with S&P 500 futures and Nasdaq futures as new Trump tariffs on China went into effect just after midnight Monday. The Nasdaq’s recent underperformance vs. the Dow Jones has several factors, but a key reason is that Apple (AAPL) and the FANG stocks — Facebook (FB), Amazon.com (AMZN), Netflix (NFLX) and Google-parent Alphabet (GOOGL) — are pulling back.
Apple and FANG stocks are a huge share of the Nasdaq composite — roughly 23.5%. Apple stock and Amazon stock are still in modest pullbacks. Google stock and Netflix stock are working on consolidations but not close to a buy point. Facebook stock is a serious sell-off, though it was, ironically, the only one of the five to rise last week. All five stocks fell up to 1% before the open in Monday’s stock market trading.
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures lost 0.2%. Nasdaq 100 futures retreated 0.65%. Remember that Dow futures and other overnight action don’t necessarily translate in actual trading in the next regular session.
Crude oil futures rebounded 2% after OPEC ministers gave a lukewarm response Sunday to President Donald Trump’s demands for higher oil output. Crude futures had fallen Friday on reports that OPEC might boost output amid Trump’s jawboning.
China, Japan and South Korea markets were closed for holidays Monday.
Beijing cancelled upcoming U.S.-China trade talks over the weekend, as new Trump tariffs on $200 billion worth of Chinese goods went effect at 12:01 a.m. ET Monday. Beijing slapped tariffs on $60 billion of U.S. goods as the China trade war continues to escalate.
The new Trump tariffs start at a 10% rate, but will rise to 25% on Jan. 1 if there’s no U.S.-China trade deal. Trump has also threatened to impose tariffs on all remaining Chinese imports.
The lack of new U.S.-China trade talks doesn’t bode well for a deal in the coming weeks.
However, Wall Street has largely shrugged off trade war concerns this year, despite some near-term wobbles.
Apple seems to have avoided the latest Trump tariffs on China. But further escalation in the China trade war could hit the iPhone maker. Last week, Apple stock fell amid concerns that preorders for the new iPhone XS were a bit light.
Shares fell 2.8% last week to 217.66, ending Friday at its lowest close in a month. But Apple stock also is pulling back after running up 20% in August following a strong earnings report on July 31.
Apple has had a tendency to pop on earnings in recent quarters, then move sideways or in line with the market. If so, that could mean little progress for Apple stock for several weeks.
Facebook, Google and, to some extent, Amazon face growing regulatory oversight. Facebook and Google are still trying to address concerns about Russian meddling in U.S. elections as well as claims of bias vs. conservatives. There are also growing arguments, especially on the left, that Facebook, Google and Amazon have too much market power.
The White House is drafting an executive order for President Donald Trump’s that would direct antitrust and law-enforcement agencies to probe Facebook and Google. Citigroup recently called for Amazon to split itself into two, a cloud computing company and a retail business, to avoid antitrust scrutiny.
Meanwhile, Facebook earnings growth is slowing rapidly as user levels start to top out and costs soar to prevent fake news.
Facebook stock eked out a 0.4% weekly gain last week. But it’s just above a five-month low. On a weekly chart, the relative strength line, which tracks a stock’s performance vs. the S&P 500 index, is at its lowest since the start of 2017.
Google stock is in a flat base, but fell sharply at the end of August and early September, falling below its 50-day moving average. Google’s RS line is at worst levels since late May.
Amazon stock is testing its 50-day line for the first time since late April. Amazon is not far off record highs, but it’s late stage and run up quite a ways.
As for Netflix, subscriber growth and Q3 guidance was weaker than expected. Netflix is making more and more content. Content creation costs are soaring. So is spending to promote that content, which can get lost amid the flurry of new shows Various metrics suggest the quality of Netflix shows is falling.
Netflix stock found support in mid-August, but has struggled to stay above its 50-day line, which is now drifting lower. Shares closed Friday at 361.19, above its 50-day, but well off a 423.30 buy point.
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