The Big Fade. Schadenfreude is a beast -- and momentum investors are on the receiving end now.

Momentum, the practice of buying the market's best-performing stocks based on the premise they will stay the best performers, is a wonderful investing strategy when it's working in your favor. The returns are fantastic -- the Invesco S&P 500 Momentum exchange-traded fund has returned 42% a year for the past three years, more than double the SPDR S&P 500 ETF's 20% annual return. Decision making is easy, too, because you buy what's working, and you let it ride. And you get the joy of watching all the contrarians suffer while you count your winnings.

The only problem is that when momentum fades, it fades fast, and everything that made it such an attractive investing strategy goes into reverse. The winning stocks start losing. The gloating fades. Worst of all, the decision making gets harder. Investors always have to ask themselves whether the fading momentum is just a short-term pullback, or the start of even more brutal losses.

That's what momentum investors are dealing with right now, but it's hard to tell from the outside. The S&P 500, after all, rose 0.4% on Wednesday, while the Dow Jones Industrial Average advanced 0.2%, and the Nasdaq Composite gained 0.6%. For the folks watching from the cheap seats, it was a big nothing of a day, even as PayPal soared on reports of a takeover bid, Fed Chair Kevin Warsh testified before Congress, and ASML reported earnings that revealed demand for chips is still high.

But for momentum investors, it was painful. The Invesco S&P 500 Momentum ETF fell more than 2.4% on Wednesday, and is now down 7.1% in July alone. Popular stocks such as Corning, Teradyne, Sandisk, and Intel have been hit particularly hard, each one dropping more than 26% month to date. And now momentum chasers need to make a decision: Should they hold tight and hope for a comeback, or cut bait and run?

Evercore ISI technical analyst Rich Ross recommends holding tight. The Morgan Stanley US Momentum Index, which goes long on stocks with the most momentum and short on those with the least, and is rebalanced every day, is now sitting on its 200-day moving average, where technicians would expect it to make a stand and potentially bounce, Ross explains. He notes that momentum "is bottoming...as IT exorcises the excesses of an historic [first-half] charge and momentum as a factor remains intact and will resume with a vengeance in thin summer markets."

The Invesco S&P 500 Momentum ETF, meanwhile, is sitting at its 50-day moving average, a sign that it may have fallen enough to interest investors once more. If it holds support, the winners should start winning again. But if it breaks, watch out -- the meek will inherit the market.

And then we'll see who gets to gloat.

The Hot Stock: PayPal Holdings +17.2% The Biggest Loser: Pentair -15%

Best Sector: Communication Services +2.8% Worst Sector: Utilities -1%

PayPal Needs to Know When to Hold 'Em, Know When to Fold 'Em

Just because you're ubiquitous, doesn't mean you are problem free. And that's the case with PayPal, which is reportedly on the receiving end of a $60.50 per-share bid from private payments company Stripe and private-equity firm Advent International, writes my colleague Adam Clark.

PayPal is still everywhere. I use it for many payments online, and even have it set up for Google Pay on my Pixel phone. But branded payments, which is PayPal's main business category, has been in decline for a while, with little sign of improvement under multiple CEOs, even as Venmo and other parts of the company grow.

There's an argument to be made that PayPal's stock price is too low. After all, it's down 82% from its record high set nearly five years ago, even after closing up 17% at $55.52 on Wednesday. Deutsche Bank analyst Nate Svensson notes that PayPal hasn't responded to the offer yet, suggesting that the management believes it's being lowballed, and perhaps could get more if it sold off the parts rather than the company as a whole.

BTIG analyst Andrew Harte, though , thinks the offer for PayPal is a "lifeline worth taking." He offers three reasons:

   1. "Stripe's technology viewed as superior to PYPL's merchant payments 
      infrastructure. Should help retention and growth." 
 
   2. "Fair valuation at 11.5x EPS for a business expecting negative earnings 
      growth this year." 
 
   3. "Stock is in 'no-man's land' right now with a leadership change. Private 
      structure likely makes it easier to execute a multiyear turnaround." 

For long-suffering PayPal Investors, it might just be the out they need. You can read more about PayPal's offer here.

The Calendar

Abbott Laboratories, Alcoa, Citizens Financial Group, GE Aerospace, Netflix, Prologis, State Street, Taiwan Semiconductor Manufacturing, UnitedHealth Group, and U.S. Bancorp announce quarterly results tomorrow.

The Census Bureau reports retail sales data for June. Economists forecast a 0.3% month-over-month increase, after a 0.9% jump in May. Excluding autos, sales are seen declining 0.1%, compared with a 0.8% jump previously.

The National Association of Realtors releases its Pending Home Sales Index for June. The consensus call is for the PHS Index, a leading indicator of housing activity, to drop 0.3% month over month.

What We're Reading Today

   -- NFL Players Targeted in E-Commerce Scheme Using Fake Shopify Stores 
 
   -- Micron Stock Takes a Dive. A Chinese Rival Could Shake Up the Chip 
      Market. 
 
   -- What's Next for IBM Stock After 25% Collapse 
 
   -- Micron, PayPal, IBM, SpaceX, BlackRock, and More Stocks That Explain 
      Today's Market 
 
   -- TSMC Earnings Will Be a Crucial Test for AI Thursday 

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July 15, 2026 19:55 ET (23:55 GMT)

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