Hey Scoopers,

A possible good piece of news about the U.S. and China trade deal helped push the market upward. Some good earnings reports offset the one with lower than expected performance, and the stock market had a relatively good day. However, major stock market indices ended the day with a disagreement.

Beyond the overall market, the semiconductor industry is expected to enter an upward cycle, and semiconductor stocks are enjoying the ride. Also, you have one stock to blame if you are wondering how come the Dow ended the day in the red and didn’t follow its fellow indices.

Oh, by the way, these car manufacturers are like high school kids. This one announces one thing, the other one makes a similar announcement to say, “anything you do, I can do better.” This story is in the “Water Cooler” section. For the rest, scroll down to the “Overall Market,” “What’s Up?” and “What’s Down?” sections.

MARKETS

  • U.S. markets: The S&P 500 and the Nasdaq finished the day in the green, while the Dow didn’t agree with its counterparts, and wrapped Thursday in the red. Scroll to the “Overall Market” section to learn more.
  • Cryptocurrency:Bitcoin’s price stayed in the mid-$7,000 per coin range. Most Bitcoin supporters ignored the price crash on Thursday. We don’t blame them. We do the same with crashing stocks. It’s just amusing to see how they are dodging the news and playing it cool.

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OVERLL MARKET

Possible good news

What happened on Thursday?

People in the know told Bloomberg that China might increase its agricultural product purchase from the U.S. to the same level as before the whole trade deal saga started. There is also a possibility that China even increases its agricultural product purchase to a higher level if the U.S. lifts its current tariffs. That was one good news that boosted the market.

How much longer can we take these trade-induced ups and downs??

Despite such positive news, companies are still getting hammered as a result of the U.S.-China tariffs disagreements. Take iRobot (Ticker: IRBT) as an example. The stock price has fallen so much that it is now priced at 1.2 times sales. In other words, investors assume that in all the years iRobot has in front of it, the company can only grow its sales by 20%. Compared to more than 20% sales growth last year, and almost 10% growth in sales in the current year, the stock price certainly seems to be undervalued. But why?

It’s because iRobot is extremely dependent on China in the manufacturing of its products. And, tariffs are considered as a major barrier for the company’s sales and margin growth in the future. When you dig deep into the impact of trade disagreements on individual companies, that’s when you realize how many companies on both sides of the aisle are in need of an agreement by the politicians sooner rather than later. How long do you think iRobot investors can hold before they lose hope?.

WHAT’S UP

Upward cycle in the semiconductor industry

So, what happened?

Shares of Lam Research (Ticker: LRCX) were up almost 14%. The company manufactures the equipment used in the fabrication of semiconductors. It supports the product roadmap of its customers with innovation in the semiconductor industry. In 2018 alone, the company spent $1 Billion in R&D. It is already a cash-generating business with a plan to return up to 50% of the cash to shareholders in the years to come. The company’s stock price goes through rapid cycles. For example, in January of this year, the stock got hammered on the news of lower than expected demand in the memory sector.

This quarter, however, the company impressed investors with a better than expected performance. And, a few financial analysts changed their ratings to “buy” because of an expected upward demand cycle in the semiconductor market.

what’s down

Blame 3M

Shares of 3M (Ticker: MMM) were down almost 5% on Thursday. Everyone is blaming the company for dragging the Dow to the red zone. The company’s $90 billion market cap makes it an important contributor to the Dow index.

Although the company’s declining sales and earnings per share guidance cut were not what analysts expected to see, those analysts should not forget that this a dividend-paying company with a stable dividend payout. Yes, it’s unlikely that 3M grows similar to a SaaS or cloud-based technology company. However, not all companies have to do that. The reaction may just have been a bit too extreme.

WATER COOLER

Anything you do I can do better

So, what happened?

Tesla says we are making electric pickup trucks, and Ford responds we have the best performing truck lineup, and we can make it electrics too.

Tesla says we are going to make autonomous cars. Ford says we are a technology company too, and we can drop a few billion on this stuff too.

Tesla says we are introducing a crossover model, and we call it Model Y. Ford announces we are also introducing a mustang-inspired SUV.

These carmakers are like highschool kids. Everything you do, I can do better. Gee …

Hoda Mehr

Hoda Mehr

Brought to you by Hoda Mehr, Editor at Trade Stocks, CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 8,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism and storytelling to all aspects of her work. Subscribe for free here: Stockcard.io