 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Friday's Headlines 1. Markets Recover Despite Mixed Messages 2. $20 Billion Stock Sell-Off 3. Uber's Debut Falls Flat Markets Closed
Year-to-Date
 Markets Rise Despite Trade Confusion U.S. markets climbed out of steep losses Friday on word from U.S. Treasury Secretary Mnuchin, who indicated that today's trade talks with Chinese officials were "constructive." That ambiguous comment was enough to stop the selling that would've made it five straight days of losses for the S&P 500. When the closing bell rang at the NYSE, the DJIA had swung 450 points to close up 114 points or 0.44%, while the S&P500 and Nasdaq closed slightly higher for the day.
But there was no deal between U.S. and Chinese trade officials today, following President Trump's decision to raise tariff levels to 25% from 10% on $200 billion in imports early Friday morning. China's trade officials dispute that they reneged on the deal and said today it regretted the U.S. tariff increase and would take countermeasures. They didn't say how or when they would do so.
Still, it was a bruising week for markets which saw the return of volatility, broad-based selling across sectors, and investors dumping stocks in favor of cash or other asset classes. According to Bank of America Merrill Lynch, investors pulled $20 billion out of equities this week - the most since January. Year to date, investors have pulled $116 billion out of equity mutual funds - the most since 2016, and 2008, prior to that.  What are Investors Selling? It shouldn't come as a surprise that investors are selling out of the sectors that have the most exposure to global sales - particularly to China. Apple has been the poster-child for that since the trade wars began. This week was no exception. After rallying through the Spring in the hopes that a trade deal would be reached, investors have been selling shares of Apple all week. The stock is down around 7% over the past five days - its worst week of 2019 so far - given the mixed messages coming out of Washington and Beijing.  Apple is not alone. Industrial stocks like Caterpillar and Ingersoll Rand have been hit hard, but the Materials sector, which includes companies like Dow Chemical, Newmont Mining, and International Paper, have been hit the hardest. While the Info Tech sector, which includes companies like Apple and Microsoft, have the most foreign exposure in terms of sales, the Materials companies have been the hardest hit in the past month, according to S&P and FactSet.  Uber's Debut Falls Flat This will be my last Uber post of the week, I promise. The company's IPO at the NYSE today had all the trappings of a mega business event. Company executives, long-term employees, and even some of the first Uber drivers, took to the NYSE balcony to ring the ceremonial opening bell. Noticeably absent from the stage was Travis Kalanick, Uber's co-founder and former CEO. He's still on the company's board of directors, but has taken a very low profile since being replaced after a number of public relations missteps.
Uber's shares were open for public trading a little before 12pm ET at $42 per share. The stock never broke through the $45 per share offer that Uber announced last night. At the end of the day, the stock fell 7%. It's only the first day of being a public company for Uber, and we should remember that it took Facebook several months to surpass its IPO price. Still, it was an inauspicious day for the highly anticipated debut of a very high profile company.
image courtesy NYSE.com 
Charts courtesy of www.koyfin.com  News Corporation surprised the market with its 10th straight quarter of positive earnings. They beat estimates of a loss of 1 cent/share, with earnings of 4 cents/share. However, the company is down year-over-year given increased operating and interest expense.  Cyber-security leader Symantec dropped nearly 13% on the back of a mixed financial report, and the unexpected news of the CEO's resignation.  Word of the Day Though talks today were characterized as "constructive", the fact remains that those talks ended shortly after they began, and without a deal being reached. So we're back in a trade war, which means it's a good time to review, and understand what it could mean going forward.
A trade war occurs when one country (Country A) raises tariffs (a tax or duty) on another country's (Country B) imports in retaliation for Country B raising tariffs on Country A's imports.
Trade wars are controversial: Advocates say they protect and provide advantages to domestic businesses; critics claim they ultimately hurt local companies, consumers, and the economy.  photo courtesy Omaha World Herald
Today in History May 10, 1965: In a boardroom on Cove St. in New Bedford, MA, a young, crew-cut Warren Buffett takes control of decrepit textile maker Berkshire Hathaway Inc., whose stock closes that day at $18 a share. Over the next thirty-three years, the stock price rises to $84,000 a share.
Today, shares of Berkshire Hathaway Class A Stock sell for $315,500 apiece. The stock has never split, nor has Buffett issued a dividend. He and partner Charlie Munger have billions of dollars since their 60-year partnership began, and have made multi-millionaires out of tens of thousands of investors.
Roger Lowenstein, Buffett: The Making of an American Capitalist (Random House, New York, 1995), p. 130. Chart of the Day: Silly Stock Move of the Week  Amid a tumultuous week for the markets, one stock takes the prize for the silliest stock move of the week. On Wednesday, President Trump tweeted: "GREAT NEWS FOR OHIO! Just spoke to Mary Barra, CEO of General Motors, who informed me that, subject to a UAW agreement etc., GM will be selling their beautiful Lordstown Plant to Workhorse, where they plan to build Electric Trucks."
This one tweet prompted a massive surge in shares of Workhorse Group (WKHS) on high volume, spiking +214% that day, from Wednesday's open at $0.82 to its close at $2.65 (it also temporarily crashed the company's website). A move of that magnitude is extremely rare for most stocks. But it should be made clear that WKHS is a micro-cap (smaller than small-cap) penny stock that lacks trading volume and liquidity. When stocks like this get a very rare mention from the U.S. President, big moves are bound to happen.
The backstory to this includes the fact that Trump has criticized GM in the recent past for shutting down its Lordstown, Ohio plant, which was previously in production for decades, and laying off employees. After Trump's Wednesday tweet, though, GM said that it's still in the middle of negotiations to sell the plant to Workhorse. In other words, the deal is not even finalized yet.
As most overly dramatic market spikes are apt to do, WKHS stock retraced sharply the next day, but not before spiking even higher to a peak of $3.27. By Friday's market close, the stock had given back more than half of its short-lived gains. Does this mean that Workhorse Group doesn't deserve serious consideration as a top growth stock of the future? Not at all. But the basis for the stock's crazy spike this week was indeed a bit silly.
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Friday, May 10, 2019
Mixed Messages
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