WASHINGTON. Wall Street trading action this week has proved to be truly “Fast and Furious.” Monday, stocks were smithereened by news that Federal trustbusters were finally getting stirred for the first time since the 1980s. That’s when they sliced and diced the old Ma Bell (the original AT&T) into oblivion. Monday, we learned that the Department of Justice (DOJ) and the Federal Trade Commission (FTC) were busy divvying up anti-trust investigations of tech giants Google, aka Alphabet (trading symbol: GOOGL) Facebook (FB) and Amazon (AMZN).
Apple (AAPL) got hit as well. As if the iPhone maker needed this. The company is already reeling from the potential consequences of hardening trade positions on both sides of the China / US trade brouhaha.
Checking out a complex three days for Big Tech
I’ve barely managed to keep up with the barrage of financial and political news coming across the wires this week. That’s why today’s column is a bit of a wrap-up – thus far – of what’s shaping up as a rather unusual trading week in stocks and bonds. So here goes, starting with this week’s death – and partial resurrection – of a quartet of Silicon Valley’s high-tech behemoths. Including Amazon, which is simultaneously a retail behemoth.
Google, Facebook, Amazon and Apple suplexed by Federal trustbusters
Fans of professional wrestling can envision what happened when the stock market itself opened for trading Monday. The shares of the three aforementioned companies were almost literally suplexed for horrendous losses on the day. Worse, the pin action from that nasty black swan-style surprise took the rest of the market down hard, particularly the tech-heavy NASDAQ. CNBC had a decent rundown on the Monday disaster.
The tech casualty rundown
“Alphabet shares pulled back 6.9% after reports said the Justice Department is preparing to launch an antitrust probe on Google. Meanwhile, Facebook dropped 8.4% after The Wall Street Journal reported the Federal Trade Commission would be able to look into Facebook’s practices and how they impact digital competition. Amazon shares fell 4.8% after The Washington Post said an arrangement between the Federal Trade Commission and the Justice Department put the e-commerce giant under the FTC’s microscope. Apple also slipped 1.2% after Reuters reported the Justice Department received jurisdiction to investigate the company’s practices.
No place to hide
“Communications services, consumer discretionary and tech were the worst-performing sectors in the S&P 500. Communications dropped more than 3.2%, heading for its biggest one-day drop since late October, while consumer and tech both traded more than 1% lower.
“‘With the trade stuff going on, [big tech] has been a bit of a hiding place,’ said Christian Fromhertz, CEO of The Tribeca Trade Group. ‘You just can’t hide right now.’”
A surprise Tuesday snapback rally for the Fab Four techs
But then, most of the shares that plummeted to sickening lows Monday snapped back smartly in Tuesday trading action. Among their number were decent recoveries in Google, Facebook and Amazon.
What happened? Simple. Fed Chair Jerome Powell, apparently emerging from a bout of profound economic navel-gazing, observed publicly that gosh, golly-gee. Given the current international economic mess, including ripple effects from the evolving US / China trade war; the stalling of President Trump’s NAFTA replacement up on do-nothing, impeachment-mad Capitol Hill; the Tories’ unbelievably botched Brexit impasse in the UK; the impressive rout of the Globalistas in last week’s Eurozone elections; and nearly everything else, the Fed was aware that the US economy might need a little Fed help for the current economic recovery to continue. Which the Fed wanted it to do.
The Fed’s Jerome Powell declares party time. Or did he?
Did that sound to you like the Fed was considering a rate cut? Like, maybe even before the end of the year? Like maybe even in June or September? It sure sounded that way to traders and investors.
Whoopee! Out with the noisemakers, confetti and funny hats. The resulting Wall Street party took the Big Three averages and a substantial number of stocks up sharply in wildly bullish Tuesday trading action. Even our over-invested-in dog of all time pharmaceutical stock, Allergan (AGN) got a $5+ per share boost, taking it off the lowest lows I’ve seen in recent memory. (AGN is trying to give most of that back today as individual traders continue their ongoing mass-puke of these moribund shares.)
Shell-shocked tech investors were also happy to see Google, Facebook and Amazon trading sharply up Tuesday vs. Monday’s catastrophic lows.
The Powell Put Party extends its run in Wednesday trading action
Tuesday’s bullish reaction to Powell’s apparent lifeline proved strong enough to keep the rally going Wednesday morning. The momentum quickly took the Dow up roughly 200 points before irrational exuberance backed off a bit. Are we seeing the beginning of a new “Powell Put”? A revival of the Fed’s Plunge Protection Team?
As of 1 p.m. ET, the Dow is moving slowly upward again, approaching its earlier Wednesday high. Ditto the NASDAQ and the more broadly-based S&P 500. Unfortunately, our four major techs got hit again this morning. Perhaps these shares became disoriented after the violent whipsaw action they endured on Monday and Tuesday.
Even so, they’re attempting to recover Wednesday afternoon. Alphabet (Google) shares are back at basement level right now, down $6+ per share, for a 6 percent loss thus far on the day. However, Apple is back in the green at the moment, up $2.72 per share for a 1.5 percent gain. Amazon, after an unpleasant early dip, is currently up $4.40 per share, a roughly 0.28 percent gain. And Facebook is virtually flat on the day, off a couple of pennies at the moment.
All four, however, have a bit of a climb to get back to where they were even at the end of last week.
Has Silicon Valley been begging for Washington’s trustbusters to wake up?
Tech behemoths in general may have a hard time of it for quite some time now. Indeed, an increasingly aloof Silicon Valley has thumbed its collective nose at both Washington, D.C. and the average American consumer. They’ve busily pilfered massive amounts of highly personal social and economic data on virtually all Americans.
In some ways worse, they’ve censored nearly all non-politically correct viewpoints from the right. And they’ve promoted scurrilous fake news perpetrated by lefty cadres, providing a lopsided support system for the most radical left candidates trying to gain the White House in 2020.
In the meantime, via big data, online advertising hegemony, and political suppression, Silicon Valley is raking in billions of dollars of wealth for itself and its oligarch owners. At the same time, these tech billionaires and their firms have carved a feudal state out of Coastal California. In the process, they’re slaughtering what’s left of that state’s middle class. How? By pricing and taxing them out of the area and ultimately the state.
… Tech arrogance at its finest; or, Creating a Banana Republic
At the same time, they busily endorse open borders, encouraging slave labor and Democrat voting blocs to inundate California as a whole, transforming this once-vital state into a third-word feudal fiefdom housing only the ultra-wealthy and the wretchedly poor, uniting them as a new American banana republic under a now familiar one-party banner.
In other words, you could argue pretty decisively that Big Tech has beat and raised those legendary 1880-1910 Robber Barons at their own game. Which is why the Feds are taking a close look at either regulating these mega-companies, perhaps like utilities, breaking up their business monopolies, or both.
Silicon Valley does the unthinkable: Uniting Republicans and Democrats
Worse for Silicon Valley’s own Robber Barons: For entirely different reasons, not only the GOP but a substantial number of Democrats will support Federal anti-trust regulations, should it come to that. Need bi-partisan proof?
“Democratic presidential candidate Elizabeth Warren, a senator from Massachusetts, called for the breakup of the nation’s top tech companies earlier this year, sending tremors through the large field of contenders for the party’s nomination and winning praise from populist liberal activists—as well as from Steve Bannon, a former strategist for President Trump.
“Others candidates, like Sen. Amy Klobuchar (D., Minn.), a leading Democrat on antitrust issues, haven’t gone that far, but they have called for more scrutiny of big tech.
“A recent letter from Sens. Klobuchar and Marsha Blackburn (R., Tenn.) urged the FTC to ‘take action’ in response to antitrust and privacy concerns around companies such as Google and Facebook, noting the companies’ large market shares in internet markets such as search and advertising.”
A Sword of Damocles hangs over today’s giant tech companies
Markets will forget about all this from time to time as big tech continues to rake in the profits. And gain in share price. Like they did yesterday. But every time Silicon Valley anti-trust headlines concerning Alphabet / Google, Facebook, Amazon, Apple and others hit the news wires, the high-speed trading machine will flood the market with sell orders and these stocks will get massacred again.
We leave you today with the Dow, NASDAQ and S&P 500 up around half-a-percent apiece. But as usual, no one really knows where Mr. Market will actually end the day.
– Headline image: Adam Cole executing a straightjacket german suplex on Kevin Steen at the Ring of Honor. Match held at the Ted Reeve Arena in Toronto. Image and description via Wikipedia entry on “suplex.” CC 3.0 license.