U.S. equities are pulling back on Thursday as the worries over a global contagion out of China spreads. New cases have been reported in places like Scotland and the U.S. The worry is that officials will have no choice but to lock down travel to prevent the disease from spreading, which would dampen global growth.
While the major U.S. averages are trying to take things in stride, a number of underlying issues are breaking down badly.
Here are four blue chips to sell:
Ford (NYSE:F) shares are once again falling away from their 200-day moving average and have broken below a multi-month support level. A retest of the October low near $8.30 looks likely now, which would be worth a loss of roughly 8% from here.
The stock has been in a churning downtrend pattern since peaking in 2014, as the company lost an early lead in electrified vehicles amid a shift away from cars to focus on SUVs and trucks. Hope is building for new products like the new Escape crossover and the upcoming Mustang Mach-E SUV that looks to take on Tesla (NASDAQ:TSLA).
But worries remain. The company’s sales into China fell nearly 15% last quarter from the year prior. Analysts at The Benchmark Company recently initiated coverage with a “hold” rating, noting the “slow pace of details regarding the company’s restructuring actions, cash burn, and global industry trends” leaves them on the sidelines until cash flow performance improves.
Bank of America (BAC)
Bank of America (NYSE:BAC) shares are falling below their 50-day moving average for the first time since early October, setting up a likely test of the 200-day average near $30 that would be worth a loss of roughly 9% from here. Such a move would return the stock to the two-year consolidation range near $30 that has kept a lid on the price action.
Investors have been responding negatively to the company’s recent earnings report, which wasn’t as good as competitors such as JPMorgan (NYSE:JPM), as net income fell 10% due mostly to low interest rates.
Headwinds look likely to persist, with management noting on a post-earnings call that net interest income is likely going to fall “modestly” in 2020 as a result of the Federal Reserve’s three quarter-point rate cuts in 2019. Analysts at Atlantic Equities recently downgraded the stock to “neutral.”
Things just keep getting worse for Boeing (NYSE:BA), with President Donald Trump noting on the sidelines at Davos that the company was “a big disappointment” for its recent safety bungling. Boeing management have reportedly told suppliers and airline customers that the 737 Max isn’t likely to get back into the air until June or July; in stark contrast to expectations not too long ago that the plane would be flying before the end of 2019. Embarrassing, to say the least.
On a call with media this week, management said it won’t cut or suspend its dividend and it wouldn’t scrap the 737 Max altogether. But with Airbus taking advantage of the situation to grow its order book, and the company’s reputation in tatters, one wonders how long this can persist. Shares are once again threatening to break below critical support near the $300-a-share level.
Disney (NYSE:DIS) shares are falling hard out of three-month trading range, setting up at the very least a test of the 200-day moving average that could give way to a drop back to the October low — which would be worth a loss of roughly 10% from here. The company has been under pressure amid disappointment with the latest Star Wars movie (which received an underwhelming response from both critics and movie-goers) and fears that excitement around the Marvel universe is fading.
And of course, the streaming wars remain red hot as the company fights Netflix (NASDAQ:NFLX), Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN) over content. A scorched earth strategy is being embraced with Netflix burning through cash as everyone races to lock up subscribers without really worrying about cash flow or profitability. Disney, as a more mature company, won’t have the luxury of allowing its margins to pinch without investors de-rating shares.
As of this writing, William Roth did not hold a position in any of the aforementioned securities.