Google Boosted by Surprise Ruling, but Bond 'Obstacle' Weighs on Broader Market
Worries remain that the indexes are at a tipping point.
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A favorable antitrust ruling is boosting Alphabet GOOGL and its biggest customer, Apple AAPL, on Wednesday morning. The surprise ruling did not require Alphabet to sell its Chrome or other Android products and allowed it to maintain its search arrangement with Apple. Alphabet is barred from "exclusive" internet search contracts, but this ruling is seen as a victory for the search giant.
There are a number of price target increases for Alphabet stock to $250 and more, and it is up around 6% in early trading Wednesday. Shares of Apple, which will be able to continue to receive $20 to $25 billion in payments from Google, are up about 3% but UBS states that this ruling is already reflected in Apple’s EPS estimate.
After dragging on the market on Tuesday, the Magnificent Seven ETF MAGS recovered all its losses and more and is indicated higher by 2%. That certainty helps market sentiment after some rough trading to begin September, but will this news be enough to put the market back on track and heading for new highs?
The biggest obstacle to improved action is bonds. Interest rates jumped on Tuesday as the 30-year Treasury nearly reached a 5% yield. European bond auctions have been weak as heavy public spending is causing increased concern.
Investors' attention will shift to economic news for the rest of the week, with Job Openings data at 10 a.m. ET on Wednesday, followed by weekly unemployment claims on Thursday and the August jobs report on Friday.
Fed Fund futures are still indicating a very strong likelihood of a quarter-point cut in two weeks, but the jobs report on Friday is going to have an impact on rate cuts beyond that and will also influence the view of overall economic health.
While big-cap technology names are seeing increased volatility, there is still good trading and stock picking in secondary stocks. Biotechnology IBB outperformed on Tuesday, and there were pockets of strong trading despite poor market breadth.
There are worries that the indexes are at a tipping point. Still, investors are finding refuge in secondary stocks and sticking with themes outside of the Mag 7. My game plan is to stay focused on charts and stock picking and not worry too much about big-cap technology right now.
At the time of publication, Rev Shark had no positions in any securities mentioned.
