Trade War, White House Chaos in Focus Before Fed Meeting

Broadcom made headlines after Trump blocked its bid for Qualcomm

Mar 16, 2018 at 2:07 PM
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It was a seesaw week for U.S. stocks, as traders digested the latest inflation and economic data ahead of next week's highly anticipated Fed meeting. More notably, perhaps, stocks reacted to speculation of a global trade war and another dramatic week in Washington, D.C., with Rex Tillerson the latest White House staffer to hit the exits. In fact, while the Nasdaq Composite (IXIC) notched an all-time high before snapping its longest winning streak of 2018, the S&P 500 Index (SPX) suffered its longest losing streak of the year, and the Dow Jones Industrial Average (DJI) was no stranger to midday reversals. At last check, all three major market indexes are set to end the week in the red.

Revolving Door at White House

It was another wild week in Washington, D.C., starting with the Twitter firing of Secretary of State Rex Tillerson -- which came just a week after the resignation of Gary Cohn, Trump's top economic advisor. In addition, reports emerged that special counsel Robert Mueller recently subpoenaed the Trump Organization for documents related to Russia, and that the president is considering firing H.R. McMaster, his national security advisor.

Meanwhile, President Trump's recent steel and aluminum tariffs -- which excluded Mexico and Canada -- fueled concerns about a trade war with China. Boeing (BA) took the biggest hit, amid speculation that Beijing could retaliate by targeting the blue chip industrial concern (though these fellow industrial stocks could be a bargain right now). In addition, several global ETFs attracted options attention. However, Apple (AAPL) and several of its suppliers could also feel the pain if a U.S.-China trade war ensues. 

Chip Stocks Attract Attention

Speaking of Apple suppliers, Trump blocked Broadcom's (AVGO) hostile bid for Qualcomm (QCOM), citing national security concerns. Nevertheless, ahead of Broadcom's earnings report -- and amid speculation of a potential bid from Intel (INTC) -- AVGO stock attracted option bulls.

Several other chip stocks were also in focus this week, as analysts waxed optimistic. RBC hiked its price target on Nvidia (NVDA) stock, and Nomura nearly doubled its price target on Micron (MU) shares. Advanced Micro Devices (AMD), meanwhile, shrugged off a research report detailing multiple "severe security" flaws in the company's chips.

FireEye in Focus; Citron Calls a Top for One FAANG Stock

Several other tech stocks were also in focus this week. Just after flashing a "buy" signal, FireEye (FEYE) shares surged on M&A speculation. Akamai Technologies (AKAM) continued to score analyst upgrades, and Adobe Systems (ADBE) stock hit record highs after earnings. Options traders also targeted 3-D Systems (DDD) ahead of earnings.

FAANG stocks were also in the headlines, with Facebook (FB) call volume accelerated, and Citron Research calling a top for Netflix (NFLX). Elsewhere, analysts opined that Square (SQ) stock looks "like Amazon in its early days." Alphabet's (GOOGL) Google, meanwhile, announced plans to ban cryptocurrency ads, which weighed on this pair of blockchain stocks before earnings.

Analysts Eye Barbie, Blue Chips, Biotech

The official bankruptcy filing of Toys 'R' Us sent toymakers Mattel (MAT) and Hasbro (HAS) spiraling lower. Barclays added salt to the stocks' proverbial wounds, downgrading Barbie maker MAT to "underweight" and slashing its price target on HAS.

While General Electric (GE) stock was rattled by a price-target cut, fellow blue-chip stock Nike (NKE) scored a bullish brokerage note ahead of earnings next week. Likewise, UnitedHealth (UNH) and Merck (MRK) enjoyed upbeat analyst attention, while Credit Suisse predicted multi-year highs for fellow pharma stock Sarepta Therapeutics (SRPT).

Elsewhere in the biotech world, Valeant Pharmaceuticals (VRX) rocketed higher on upbeat drug data, and this duo of drug stocks sent up "buy" signals. And despite a clinical hold on its Duchenne muscular dystrophy (DMD) treatment, Leerink remained bullish on Solid Biosciences (SLDB) stock.

March Madness, Fed Meeting on the Agenda

Looking ahead, tech could continue to outperform, if this stock market signal is any indicator. And bulls may want to root for these teams to win the NCAA tournament, as the S&P tends to rally after March Madness wins.

As for next week, the marquee event for traders is the Federal Open Market Committee's (FOMC) two-day policy setting meeting, with Wall Street largely expecting a Fed rate hike. Fed Chair Jerome Powell will also be in focus, with the new central bank head participating in his first press conference following the policy announcement.


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