I predicted on Friday that a pause in the U.S.-Chinese trade war -- something that I thought was unlikely -- could give us about a 5% increase. Well, with that pause now in place, it looks from the futures as I write this that we're getting that.
What can I say? We finally had a situation where the hedge funds might have been really leaning the wrong way, although someone had a real good call to buy, as we saw in Friday's last hour of trading. Most of the executives I have been dealing with were hoping for the best (or were anticipating the worst) and had been frantically trying to adjust.
However, I don't think investors realize how difficult this whole process has been for Corporate America. We had CEOs all over America trying to buy in advance of the boost in U.S. anti-Chinese tariffs to 25% from the 10% already in place. And we still have CEOs with plants in China that want very much to get as much manufacturing out of that country as possible.
We also have trains and trucks working around the clock to move goods that have come from China out of the West Coast ports. It's just a gigantic supply-chain mess, but everyone has now gotten a breather to give them more time to do something if talks break down.
Here are my initial thoughts on how to play things on Monday and beyond:
Agribusiness Looks Good
China's decision to buy more American goods is the usual sop to U.S. farmers. There really isn't enough natural gas (or oil, for that matter) to go to China from the United States, so it's all about American soybeans.
Maybe someone buys Dow DuPont (DWDP) off of this because of its ag biz? Still, let's take these gestures with a grain of salt.
Industrials and Tech
Let's also take the deal by Qualcomm (QCOM) to buy NXP Semiconductors (NXPI) with a grain of salt now that the Chinese are willing to greenlight. Give me a break! Qualcomm already paid $2 billion to NXP in break-up fees.
Moreover, the last thing Qualcomm wants to do is to get bigger in autos. I think that Qualcomm is thinking about the coming 5G cycle, as CEO Steve Mollenkopf told me on Mad Money last week. Mollenkopf doesn't want to buy anything but his own stock.
Still, the fallout for a bunch of industries will be huge here. For example, there's the win for Honeywell (HON) , United Technologies (UTX) and Emerson Electric (EMR) . They could all be up 2% or 3%.
United Technologies in particular could really get a boost given how it wants to do its Otis spin-off. Investors will think that the Chinese are going to be very positive toward UTX's product suite.
It's also possible that a lot of investors will gravitate toward tech -- notably semiconductors with huge exposure to China, particularly Micron Technology (MU) and Skyworks Solutions (SWKS) . Those will also give you good exposure to the stock that most are going to run for initially -- Apple (AAPL) .
There's only one problem: there are more analysts who want to get out of Apple than in. I think there will be many who want to get out on any strength, because they continue to care only about one thing -- a possible slowdown in iPhones.
Still, Apple is down so big already that analysts will have to respect the fact that Monday won't be the day to downgrade it further. Instead, I predict the stock will see an "up" opening that gets faded for the rest of the day. However, the long anti-Apple knives will then be sharpened for Tuesday.
Will oil catch a bid because there's less of a chance of a slowdown because of a possible peace moment? If it doesn't, I think there might be still one more chance to sell, because I was very surprised to see no decline in the rig count on Friday. It's still "full speed ahead" for drilling.
I don't believe in the extension of any deal between the Saudis and the Russians about higher oil prices. They have been worthless and they remain worthless.
The FANGs and the Cloud Kings
I know what will be most annoying -- the cloud and FANG stocks. The ones least impacted by China because they have so little business there might go up the most, as they're such of a big part of the S&P 500. After all, when investors buy the S&P 500, they're buying these names.
So, amazingly, they and not actual Chinese-related stocks will most likely be Monday's biggest winners.