 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Monday's Headlines 1. U.S. Markets Falter After Chip Stocks Sell off 2. Ford Announces Major Job Cuts in Restructuring 3. CEO Pay Reaches Dizzying Heights Markets Closed
 Markets Slide as U.S. Companies Shun Huawei
The U.S. China Trade war is about many issues, but the one that has been front and center over the past several day concerns Huawei, the Chinese telecom provider. Several reports say that Alphabet, the parent company of Google, will restrict access to certain Android features to comply with a U.S. requirement that suppliers must seek licenses to keep selling to Huawei. Bloomberg News reported that semiconductor companies, including Intel, Qualcomm, Xilinx and Broadcom have told their employees that they will not supply the Chinese telecom giant with their chips, going forward.
James has more on the semiconductor stock selloff, below, but suffice to say that this news prompted investors to shun semi stocks today, contributing to a broader selloff for U.S. markets.
Huawei has become the number two seller of smartphones worldwide, recently passing Apple to trail Samsung. As you may recall from Friday's note and recent news, Huawei has been singled out by President Trump and U.S. trade officials for allegedly violating trade sanctions in doing business with Iran. The Trump Administration put Huawei on a blacklist for U.S. companies. On May 15th, President Trump issued an executive order banning all U.S. companies from utilizing information and communications technology from any party considered a national security threat.
Read more: Why Huawei is in the Middle of the U.S. China Trade War
Correction: Last Friday I incorrectly wrote that Huawei's CFO, Meng Wanzhou, was arrested in Canada and extradited to the U.S. She has, in fact, not yet been extradited, although she is facing extradition charges. That's a big difference, especially in this context. My apologies.
Here is the Executive Order issued on May 15th from the White House. 
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Ford Makes Deep Cuts in Restructuring U.S. automaker Ford announced 7000 job cuts to its salaried workforce today. In a letter from Ford CEO Jim Hackett, he describes the layoffs as impacting 10% of the company's salaried workforce, with a combination of voluntary and involuntary separations, 2500 of which were announced last year. Hackett says the cuts will help Ford save up to $600 million a year and eliminate unnecessary bureaucracy. Most of the job cuts will come from outside the U.S.
Manufacturing jobs will not be impacted by these cuts. U.S. automakers Ford and General Motors have been trying to right-size their global operations over the past several years as competition and slowing sales have forced them to tighten their belts. Ford, in particular, has announced it will be killing off most of its legacy car and sedan models to focus on SUVs and trucks, which produce better margins given their higher selling prices.
Here's a look at Ford shares (in blue) over the past 5 years versus the S&P 500. It has not been a smooth ride as Ford has declined nearly 35% during that time. chart via tradingview.com
 CEO Pay Reaches Dizzying Heights Bloomberg News just ran its latest scorecard of executive compensation, and the results are staggering. The top 5 highest paid executives brought in a collected total of $1.18 billion in combined salary and stock awards in 2018. The highest paid of them all, Tesla's Elon Musk, received a pay package totaling $513 million, most of which is in the form of stock options. Does this mean that Musk literally pocketed $513 million pre-tax in 2018? Absolutely not. It means he was granted stock options that vest over a period of time and are tied to performance targets. In Musk's case, he was granted over $2 billion worth of options in 2018 that vest over 10 years as long as Tesla achieves performance targets under his stewardship. In fact, Musk received no salary compensation in 2018 at all.
Here is a list of the top 5 highest paid CEOs for 2018, per Bloomberg.
Notice, there are no women on that list. You have to go all the way down to number 34 to find Safra Katz, the co-CEO of Oracle, who received $40.4 million in 2018 in the form of options and stock awards. That's just wrong.
Harvard ran the numbers to determine which industries have the highest paid CEOs as of 2018. Consumer Discretionary, Staples and IT CEOs get the fattest paychecks, on average. 
Charts courtesy of www.koyfin.com 
Aerospace and defense stocks like Northrup Grumann and Raytheon have been hot all year as investors bet they will continue to see favorable support from the Trump administration no matter what happens with China.
Chip stocks all got smashed today on the Huawei news. Qualcomm, Western Digital, and Applied Materials got hurt the most.
India's stock market is rallying as its general election approaches on May 23. The India Nifty Fifty is up 8% this year, and today was another good day. Not so much everywhere else, though.
 photo courtesy Morehouse College
Word of the Day
Given the news that philanthropist and private equity billionaire Robert F. Smith has pledged to pay off all the student debt of the 2019 graduating class of Morehouse College, we thought this would be worthy.
Read more: Who is Robert F. Smith
Philanthropy involves charitable giving to human causes on a large scale. Philanthropy must be more than just a charitable donation. It is an effort an individual or organization undertakes based on an altruistic desire to improve human welfare. Wealthy individuals sometimes establish foundations to facilitate their philanthropic efforts. Philanthropy dates back to Greek philosopher Plato in 347 B.C. His will instructed his nephew to use the proceeds of the family farm to fund the academy that Plato founded. The money helped students and faculty keep the academy running.
Robert F. Smith's pledge, which he made with is wife in the name of their foundation, is estimated to be worth $40 million. It will pay unquantifiable benefits to the students he has helped, and their families. Well done, Mr. Smith.
 source: http://www.datamp.org/patents
Today in History
May 20, 1873: Jacob Davis, a Latvian tailor who has settled in Reno, Nevada, and a Bavarian merchant named Levi Strauss, who sells cloth in San Francisco, jointly take out U.S. Patent No. 139,121. Strauss supplies the $68 in patent fees; Davis supplies the design, which he had created after one of his customers kept ripping through his pants pockets. The two men patent the process for holding indigo denim waist overalls together with metal rivets -- the first blue jeans.
Source: http://www.levistrauss.com/about/; http://web.mit.edu/invent/iow/strauss.html
Chart of the Day: Semiconductor Index Gaps Down on Huawei Crackdown
 As noted above, tech stocks were pummeled on Monday, particularly the semiconductor sector, in the wake of the Trump Administration's crackdown on U.S. trade with China's Huawei Technologies. Google halted transfers of technology to Huawei on Monday, and major chipmakers like Qualcomm, Broadcom, and Intel are also reportedly suspending supplies to the embattled Chinese telecom giant. On the prospect of a sizable loss of revenue for these and other chipmakers, all three of the stocks gapped down on Monday, prompting a substantial plunge for the key PHLX semiconductor sector index. The index counts the three stocks among its top ten components.
The chart above shows SOXX – the exchange-traded fund based on the PHLX semiconductor sector. The ETF gapped down sharply from Friday's close and ended Monday's trading session down around 4%, not a small drop for an ETF, even in this relatively volatile industry. In the process, SOXX established a new two-month low and has closely approached its key 200-day moving average to the downside. As it currently stands, the ETF is just about 16% below its early-April record high. SOXX had previously been on a strong rebound and recovery from its late-December lows, much like the rest of the market. But slightly more than a week ago, price broke down below both a key uptrend line and the 50-day moving average.
Looking ahead, as more major tech companies potentially announce trade suspensions with Huawei, the sell-off is likely to continue, at least in the short term. Any key breakdown below the 200-day moving average could signify even further downside for the sector.
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Monday, May 20, 2019
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