GOP Senate Majority Shrinks; Apple Is Carving New Base: S&P 500 Futures

Stock futures edged higher early Wednesday morning after Democrat Doug Jones won Alabama's special election Tuesday, reducing the GOP's already-narrow Senate majority. Meanwhile, investors are looking ahead to the Federal Reserve's 2018 outlook and an expected interest-rate hike Wednesday afternoon.

[ibd-display-video id=2970198 width=50 float=left autostart=true] Alabama is normally a deep-red state, but accusations of sexual misconduct involving teens hurt Republican Roy Moore.

Tuesday's vote will complicate President Trump's agenda by cutting the GOP Senate majority to just 51-49. However, Jones likely won't take office for a few weeks, giving Republicans some time to pass tax cuts with the current 52-48 split.

Details of the evolving GOP tax-cut plan appeared after Tuesday's close. Meanwhile, the Fed is virtually assured of raising rates at 2 p.m. ET, but the question is how many hikes that policymakers will forecast for 2018.

S&P 500 index futures rose 0.1% vs. fair value. Dow and Nasdaq 100 futures advanced about 0.15%.

Meanwhile, Apple ( AAPL ) is close to carving out a flat base. But Apple chip plays are not faring as well, with Broadcom ( AVGO ) undercutting its buy point Tuesday, joining Skyworks Solutions ( SWKS ), Applied Materials ( AMAT ), Analog Devices ( ADI ) and Qorvo (QRVO) below the 50-day line as chipmakers continue to slump.

The GOP tax plan being hashed out between the House and Senate now has a 21% corporate tax cut, down from the current 35%, but up from prior plans for 20%. There would be a 37% personal income rate and the mortgage interest deduction would be capped at $750,000, down from the current $1 million but above the House's $500,000.


Apple shares fell 0.6% to 171.70 in Tuesday's stock market trading , but they're still holding support slightly above the 50-day moving average.

Apple appears to be headed toward a flat base , which needs a minimum of five weeks. That would occur at the end of this week. This hypothetical bullish consolidation, with a potential buy point of 176.34, would be a base-on-base formation above a prior cup-with-handle pattern.

Apple is investing $390 million in Finisar (FNSR) to help the optical components maker revamp a Texas plant to make key iPhone chips. Finisar shot up in premarket trading on Wednesday's news.

Apple, a member of the Nasdaq, S&P 500 and Dow industrials, has shaken off iPhone X supply concerns .

But such worries may be affecting key iPhone-related chip plays, which are also struggling due to general weakness in semiconductors.


Broadcom had been one of the stronger Apple chipmakers, holding above its 259.46 buy point for the most part since the late-October breakout, becoming somewhat extended in late November.

Broadcom, which is mounting a now-hostile bid for fellow wireless-chip giant Qualcomm (QCOM), reported strong earnings and guidance as well as a big dividend hike last week.

Shares popped intraday Dec. 7 on the report, but closed flat. In the last three sessions, shares tested their buy point and 50-day moving average, finally closing below both levels with Tuesday's 0.4% loss to 258.81.

Because Broadcom wiped out a 10% gain from its buy point, that entry is now invalid. A strong, high-volume retaking of the 50-day line could present a new buying opportunity.

Applied Materials

The chip-equipment giant is not a direct Apple supplier, though it's been deemed an iPhone X play for its work with OLED screens.

Applied Materials fell 2.2% to 50.47 on Tuesday, continuing to hold below its 50-day moving average.

In fact, just one of the 22 largest chip-gear stocks by market cap is current above that key support line, Kulicke & Soffa (KLIC). That's despite the record chip-gear sales in 2017 and 2018 seen by industry group SEMI.

Among top chipmakers, Intel (INTC) and Texas Instruments (TXN) are slightly above their 50-day lines, but not many others are, outside of M&A-related plays.

Analog Devices

Analog Devices successfully broke out in late September/early October, unlike many other Apple suppliers. Shares rose more than 9% above an 85.81 buy point by Nov. 20. But shares then reversed lower on the company's latest earnings report and soon undercut their 50-day line.

In recent sessions, Analog Devices has been holding just above or below the 85.81 entry, which is technically still valid. Shares fell 0.4% to 85.48 on Tuesday.

Skyworks Solutions, Qorvo

Skyworks broke out in late October and Qorvo in early November, with both rising for a few sessions but then quickly tumbling through their buy points and 50-day lines.

Skyworks fell 0.5% to 96.47 on Tuesday, about 18% off its high. Qorvo lost 1.3% to 67.70, hitting a four-month low intraday.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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