It's All Over
Stocks are plunging. Justin Timberlake is now a creepy old guy wearing clothing meant for 16-year-olds. A teen trying to enjoy Timberlake's Super Bowl show on the field is this year's first Twitter meme star. Bitcoin has been reduced to rubble. All in all, what was a promising start to 2018 has taken a sudden turn for the worse. Unfortunately for investors in the stock market, the pain is unlikely to end in the near-term despite investment banks trying to talk up stocks on TV (while telling their clients to sell ... come on you know it's true). The reality is that while corporate earnings and the U.S. job market each remain strong stocks lack a new catalyst to push them higher. A note from Goldman Sachs summed up the reality: "With S&P 500 sitting just 3% below our year-end target, significant further appreciation will require either an upward revision to our earnings per share growth forecast or belief that 'irrational exuberance' will lift multiples. The latter scenario would increase the likelihood of a subsequent correction, in our view." The investment bank added that rising short- and long-term interest rates should limit further expansion in price-to-earnings multiples. Jefferies strategists chimed in with this reminder on Monday: "The bottom line is that the bond market has finally become aware of much faster wage growth pressures." That said, congrats to the Philadelphia Eagles -- like stocks in January, you flew impressively throughout the postseason.
Shares of the world's most valuable tech company, Apple (AAPL) , deserve the attention of every single investor right now. After Apple's mixed (at best) earnings report on Thursday, Feb. 1, the stock dropped 4.3% on Friday, Feb. 2, and left it dangerously near its 200-day moving average. That level hasn't been breached since July 2016, according to Bloomberg data. Shares of the Action Alerts Plus holding have plunged about 10% (see the AAP team's current thinking here) since closing at a record high on Jan. 18. Interestingly, that's the day Apple revealed its big tax reform-fueled cash repatriation plans. As I said above, the market has run out of catalysts to the upside ...
This Deal Could Get Done
You have to hand it to Broadcom (AVGO) CEO Hock Tan -- he has played his pursuit of larger rival Qualcomm (QCOM) quite well. The latest example came Monday, Feb. 5, as Action Alerts Plus holding Broadcom lifted its offer for Qualcomm to $82 a share (high-end of whisper estimates on Wall Street). Broadcom also extended an olive branch to Qualcomm ChairmanPaul Jacobs (and son of founder) and one other director to join the combined entity's board of directors. And, the company promised to pay a host of fees to Qualcomm should a deal not receive regulatory approval. Qualcomm now has what looks to be a very fair offer (strong premium plus various concessions) that should be strongly considered. If it walks away, Qualcomm risks making this its Yahoo moment. Remember when the search giant snagged a $44 billion offer from Microsoft (MSFT) but turned it down 2008? It was later sold in 2017 for $4.48 billion to Verizon (VZ) .
What to be looking for this week in the markets, via TheStreet's newsroom.
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