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It's unlikely there will be much holiday cheer for investors when stocks are teetering on the brink of a bear market as the the final trading week of 2018 commences. US President Donald Trump, whose tax cuts and pro market policies powered the early 2018 rally, has lately become one of the biggest risks to equities.
And the headwinds he generates don't appear to be waning any time soon. With the latest departure from his cabinet, his impasse with Congress that has led to a partial federal government shutdown over the weekend and the news that he considered firing the Federal Reserve chairman, there are now additional worries to drive an already gloomy market outlook.
During the past week the Dow Jones Industrial Average plummeted, its worst performance in almost a decade. At the same time the NASDAQ Composite has become the first major American index to close in bear market territory; it's now down 22% from its high.
With this environment of fear fueling market uncertainty, stocks are likely to remain under pressure through the holidays, a time when trading activity is generally very thin. Here are three stocks which might see additional activity due to company specific developments.
After a precipitous decline during this market downturn, shares of Apple (NASDAQ:AAPL), once the world’s most valuable company, may come under additional pressure as some technical signals are now flashing red.
After hitting records in October, when shares of Apple reached $233, the stock—which closed on Friday at $150.73—has fallen 35% in one of the worst performances among Dow-listed stocks. And there's more potential downside in store.
Technical charts are signaling that shares of the iPhone manufacturer have entered a death cross, a bearish technical signal formed when a stock's 50-day moving average crosses below its 200-day moving average. This typically indicates there's the possibility of a major selloff ahead.
Another fundamental development that continues to affect its share price: an additional setback in its legal battle with Qualcomm (NASDAQ:QCOM). After Qualcomm scored a recent win in Chinese courts over its licensing dispute with Apple, the chip maker also won an injunction that bans Apple from selling some iPhones in Germany, including the iPhone 7 and iPhone 8.
Apple says it is appealing the rulings. Still, in the meantime it will have to stop selling those models at its German Apple stores.
Shares of JD.Com (NASDAQ:JD) China’s second-largest e-commerce player got a major boost on Friday when authorities in Minneapolis said they won’t press charges against the company’s Chief Executive Officer Richard Liu in connection with rape allegations made against him, which led to his arrest in August. Though Liu was released the next day and quickly returned to China, the legal probe had been going on for more than three months.
The potential criminal charges have kept JD.com’s shares under pressure since the arrest. Liu’s control of the firm he founded, and his vast voting rights, have tied his fate closely with the JD.com's. In China, he's viewed as a visionary, the driving force behind one of the country’s most successful internet companies.
“We are pleased to see this decision,” the company said in a statement on its website. JD.com's American Depository Receipt (ADR) jumped 5.9% on the news, which was released on Friday, to $21.08. That's still significantly below the stock's closing price of $29.43 on the day before Liu’s arrest became public.
We might see further upside movement in JD.com stock in the coming week. Nevertheless, any upside will be limited due to the prevailing overall negativity in the market right now for high-growth tech stocks.
Uncertainty about the future of Pacific Gas & Electric (NYSE:PCG) took another ugly turn on Friday when California regulators said they are considering splitting up the utility or making other drastic changes amid concerns over the company’s role in recent gas explosions and wildfires.
Ahead of the weekend, the California Public Utilities Commission said it will also consider whether PG&E’s board and executive management should be replaced. The agency said it hadn’t drawn any conclusions on how it will act, and it will seek input from the public.
Trading $22.75, PG&E shares have lost about half of their value on accusations that the equipment owned by the largest utility in California might have played a role in sparking last month’s Camp Fire, the deadliest and most destructive conflagration in state history. The utility is also confronting billions of dollars worth of claims stemming from last year’s deadly Northern California fires, where state investigators have said its equipment sparked at least 17 blazes, with rule violations found in 11 of them.
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