Market action has been dull and slow for a couple weeks now, but there are indications that volatility is likely to pick up as the market deals with more news events.
Here on Wednesday morning there is better-than-expected economic growth from China, more talk about trade wars with Europe, stronger oil, mixed earnings from Netflix Inc. (NFLX) , soft earnings from IBM Corp. (IBM) , excellent news for Qualcomm Inc. (QCOM) on the settlement of patent litigation with Apple Inc. (AAPL) , a strong move in Intel Corp. (INTC) as it exits the 5G modem business, initiation of coverage of pot names by Merrill Lynch and high expectations as we head into the meat of earnings season.
On Tuesday the indices didn't move much, but under the surface health care and some software names were under pressure while the semiconductor sector jumped to new recent highs. The news from QCOM caught the market by surprise and caused some rotational action in the final hour of trading that left market players a bit confused.
Qualcomm continues its ascent here on Wednesday morning as analyst rush to increase target prices. There are reports that the settlement with Apple could be worth $2 in earnings per share to QCOM. The stock currently has a multiple of around 15 so that would be worth at least $30. QCOM was around $57 when the news hit and is indicated at around $76 in pre-market trading, so it still seems to have some potential on that simplistic valuation argument.
Although the indices have been slowly inching higher since a technical breakout on April 1, it has been a difficult market to navigate. Volume has been light, there has been quite a bit of sector rotation, small-caps have underperformed and momentum has been choppy at best. Stock picking was much easier earlier in the year and has become more challenging as many stocks look to consolidate and there isn't as much strong leadership.
Semiconductors are going to lead the charge here on Wednesday due to QCOM and Intel, but the earnings from Netflix and IBM will keep sentiment contained.
There is a mild positive open developing, but there has been a tendency toward early selling and late-day strength that has been challenging for traders.
