U.S. stock indexes stumbled in early trade Thursday and then deepened the losses as the day wore on. Banks and restaurant stocks were among the morning’s top performers but largely because of one or two stocks in each niche.
The Nasdaq chopped off 1.6%, while the S&P 500 and the Dow Jones Industrial Average severed 1.3% and 1.2% respectively. Small caps in the Russell 2000 fell 1.3%. Indexes were near session lows after CNBC reported that a meeting between President Trump and China’s Xi Jinping is unlikely before the March deadline.
Volume was running higher on both major exchanges vs. the previous session.
BB&T (BBT) and SunTrust Banks (STI) rose on news that the two superregional banks would merge. BB&T gapped up 6% but then gave back all but 1.5% of the gain. SunTrust soared 12% in first five minutes of trade and then eased to a 7% gain. The merger would create the sixth largest U.S. bank in assets and deposits. The combined company will operate under a new name that has not yet been revealed.
Six of the seven bank industry groups were up Thursday in late morning action.
Restaurant Stocks Heat Up
In the restaurant space, Chipotle Mexican Grill (CMG) stabbed about 14% higher on a stronger than expected Q4 report. Results were released late Wednesday. Chipotle carved a double-bottom base and broke above the 501.08 buy point in the week ended Jan. 11. Weekly volume was 41% above normal.
The Big Picture alerted readers to Chipotle’s improved condition Dec. 28 and to the breakout in the week ended Jan. 11. The stock is up 20% for those who acted on the double-bottom buy point.
Other restaurant stocks showing good action include Starbucks (SBUX) and Restaurant Brands International (QSR). Starbucks is trading near a 69.08 buy point.
Burger King and Popeye’s owner Restaurant Brands has sketched a 64.27 entry in a saucer-with-handle pattern ahead of its Feb. 11 earnings report.
Both Restaurant Brands and Starbucks have strong Composite Ratings. Restaurant Brands carries a 95 reading, and Starbucks is at 93. A rating of 93 puts a stock in the top 7% of all stocks in IBD’s database. The Composite Rating combines all five IBD ratings into a single number.
