It's like Groundhog Day all over again.
Autopilot seems to be how each session goes these days, with the script that sees an initial move higher, followed by selling midday, then tug-of-war between blue chips (upside) and high-flyers (downside) - which has mostly been won by the latter, although the carnage in (former) high-flyers has been devastating. If I thought the selling was overdone a week ago, then I really think it's overdone now. On that note, it's easy to beat up on these names as the pile-on-effect is remarkable.
All the big news in the market and economy today revolve around tax policy.
Pfizer's deal for AstraZeneca (NYSE:AZN) is a bald-faced attempt to exploit new tax rules in the United Kingdom. The Patent Box tax rule went into effect last April, and it allows companies to have lower tax rates on drugs developed or registered in the United Kingdom. Beginning in 2017, the tax rate goes to 10% from 21% and is a huge incentive for companies selling billions of dollars of drugs each year, and more than enough incentive to pull the trigger on a deal that otherwise looks weak on paper.
Toyota is moving its US headquarters to Texas from California because of tax policy. This is a massive blow to California, and those that believe high taxes are the answer, when in fact they are the cause of many societal ills, including income inequality (this will be feature in tomorrow morning's hotline). Rick Perry has been able to snatch 50 companies from California in the past year and half, generating 14,000 jobs for the Great State of Texas.
Apple would rather borrow billions of dollars than bring money home from abroad, only to be hit with a 35% tax rate. Tim Cook is a big Obama supporter, but when it comes to stuff like this, from the immortal words in New Jack City: "it's just business."
Remainder of Session
As the bifurcation continues I suggest being calm, having cash and waiting to buy...yes, even those oversold high-flyers.