Beware of incoming torpedoes, traders. 

President Trump is back to rattling the markets again with his comments. Trump said Tuesday he wasn't pleased with last week's trade talks with China and cast doubt on the status of a June 12 meeting with North Korea leader Kim Jong Un. The Dow Jones Industrial Average tanked 178 points on Tuesday following Trump's comments. Markets on Wednesday look equally shaky. Europe's oil and gas sector was nailed 2.5%, the worst slide since February on a closing basis, according to Bloomberg data, at the hands of falling crude oil prices. Major markets in Europe and Asia were firmly in the red. Dow futures were down more than 170 points as of 6:32 a.m. ET.

Curious on why stocks are so quick to sell off on yet another verbal bombing from Trump? It's simple: Wall Street remains incredibly bullish on the market and by extension so do their clients across the globe.

Take for example these comments from Goldman Sachs this week, where you can just sense the optimism with each passing sentence:

"We forecast strong earnings and dividend growth will help the S&P 500 rise by 5% to our year-end target of 2850 assuming no change in valuation. We expect dividends will rise by 10% to $54. We noted in January that the dividend swap market's pricing of 8% 2018 DPS growth did not reflect the steeper trajectory for S&P 500 earnings following the passage of corporate tax reform. Today, the 2018 dividend swap contract trades in line with our top-down estimate of $54 (+10%). Exceptional 1Q results give investors reason for optimism. S&P 500 EPS grew by 24% year/year in 1Q, supported by 11% sales growth and 108 bpof margin expansion. Pretax earnings rose by an impressive 13%, suggesting fundamentals are strong even without the accretive effects of lower corporate tax rates. DPS grew by 9% year/year. For the first time since S&P began collecting the data in 2003, no company cut its dividend during the first four months of the year. In fact, 181 S&P 500 companies have raised their common dividends by a median of 10%. The largest weighted increases were by Apple (AAPL) (+16%), AbbVie (ABBV) (+35%), and Exxon Mobil (XOM) (+6%). Dividend raises both increase the yield to equity investors and the intrinsic value of an equity when valuing the market with a DDM."

With that degree of optimism around dividend and earnings growth, no wonder the market is quick to sell off on Trump comments. Investors are ill-prepared for the return of volatility and will sell first and ask questions later. 

Said TheStreet's founder Jim Cramer over on Real Money: "So stick with individual stocks. Do not be afraid to cut your losses and recognize that when the charts break, there's no rallying until the sellers stop selling and the buy cycle begins anew."

Welcome to Silicon Valley 

I touched down in San Francisco Tuesday afternoon for a week of meetings and typing from a cozy Hampton Inn 0.7 miles from the airport. How you know you aren't in New York anymore and tech valuations are hovering around record highs? You turn on the radio and there is a commercial for Amazon (AMZN) (which is an Action Alerts PLUS holding) cloud services and a Starbucks coffee costs $1 more than in already pricey New York. One company I am here to talk with is Action Alerts PLUS holding PayPal.

PayPal (PYPL) shares have traded sideways over the last five sessions as Wall Street awaits the fintech giant's key investor day on Thursday. TheStreet will be at PayPal's San Francisco headquarters covering the event, so be sure to check in with yours truly @Briansozzi on Twitter. Wall Street is keen to hear more about PayPal's transition deal with eBay (EBAY) announced several months ago. "CFO's goal for the investor meeting will be to address concerns around the eBay transition," says JPMorgan analyst Tien-tsin Huang. "Recognizing proof points will take time, investors should take some comfort recognizing that PayPal successfully navigated other transitions including customer choice and an asset light deal with Synchrony."

Long-time tech analyst Mark Mahaney at RBC Capital Markets also expects a deep discussion on how PayPal will monetize the popular money sharing app Venmo and deploy even more of its cash (the market wants more deals from PayPal, especially in light of the well-received iZettle deal).

What's Hot 

(1) Micron (MU) has suddenly become one of the hottest stocks in the market after its investor day on Monday, up 11% on the week. Credit goes to Micron execs for taking the wraps off a monstrous $10 billion stock buyback. TheStreet looked at the numbers, and Micron's stock could explode to more than $100 a share off the buyback (current price: $59). Here's how it could happen.

(2) According to new data from CB Insights, venture capital (VC for you cool kids) investment in private and emerging companies in the U.S. tallied $22.1 billion in the first quarter, up 21% sequentially and up 49% annually. The $22.1 billion in total funding represents the highest dollar amount since Goldman Sachs began tracking the data in the first quarter of 2016. The previous high, pointed out Goldman, was $19 billion in the second and third quarters of 2015.

 

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