Stocks advanced Tuesday following a temporary reprieve on restrictions on U.S. exports to China telecom giant Huawei Technologies, reflecting a slight reduction in one front of the Sino-American tariff war.
How are major benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.51% rose 159 points, or 0.6%, to 25,839, while the S&P 500 index SPX, +0.83% gained 23 points, or 0.8%, to 2,863. The Nasdaq Composite Index COMP, +1.11% gained 84 points, or 1.1%, to 7,785.
On Monday, the Dow fell 84.10 points, or 0.3%, to 25,679.90, the S&P 500 declined 0.7% to 2,840.23, while the Nasdaq dropped 1.5% to 7,702.38.
What’s driving the market?
Stock buying appeared to be returning to markets, after Monday’s technology-led losses. Shares of chip makers bore the brunt of declines after technology companies in the U.S. and elsewhere said they have started to comply with the White House’s ban on China’s Huawei Technologies Inc.
U.S. officials said late Monday they would offer some temporary exceptions to an export blacklist against Huawei Technologies Co., which will provide some suppliers and customers of China’s telecom giant a 90-day reprieve from tough trade penalties—a move that appeared to soothe investor anxiety somewhat.
However, the rhetoric didn’t let up on Tuesday as the chief executive of Huawei, Ren Zhengfei, fired back against the blacklist for his company, saying the U.S. government is underestimating how powerful his company will be in the 5G space in a few years. He also said the company has been stockpiling chips, and, therefore, is well prepared for that ban.
Meanwhile, nearly 200 American footwear companies, including Nike Inc. NKE, +0.33% and Under Armour Inc. UA, -0.34% wrote a letter to U.S. President Donald Trump, asking him to remove proposed tariffs on imported shoes from China. The companies said it would be “catastrophic” for consumers, corporations and the U.S. economy.
Late Monday, Federal Reserve Chairman Jerome Powell played down fears over a business debt boom, saying it is not the same threat that subprime mortgages were a decade ago.
What’s on the economic calendar?
Existing-home sales fell 4.4% in April from a year earlier, and 0.4% below March levels, the National Association of Realtors said Tuesday. The median selling price in April was $267,300, a 3.6% annual increase.
Chicago Fed President Charles Evans gave a speech at the Atlanta Fed’s financial markets conference at 10:45 a.m., while Boston Fed President Eric Rosengren will give a speech to the Economic Club of New York at 12:10 p.m. Both are voting members of the Fed’s interest-rate setting committee.
Which stocks are in focus?
Shares of J.C. Penney Co. Inc. JCP, -9.57% tumbled 9.1%, after the department store retailer missed Wall Street expectations for first quarter profit. Revenue declined from the quarter ago, but still beat analyst forecasts.
Fellow retailer Kohl’s Corp. KSS, -10.81% stock fell more than 10%, after the company reported fiscal first-quarter earnings and same-store sales that missed expectations, while cutting its full-year profit outlook.
Shares of Merck & Co. Inc. MRK, +0.48% could be in focus Tuesday, after the pharmaceutical giant said Tuesday that it had reached a deal to acquirePeloton Therapeutics Inc. PLTX, +0.00% for an upfront payment of $1.05 billion in cash. Peloton, a biotech firm focused on cancer treatments was set to price an initial public offering Wednesday.
AutoZone Inc. AZO, +3.39% shares rose 2.9% Tuesday morning, after the auto-parts retailer beat analysts expectations for fiscal third-quarter profits. and same-store sales growth.
What are analysts saying?
“The market is responding to the Trump administration backpedaling a bit on Huawei, which suggests that we are moving toward rather than away from a trade agreement, and that’s what the market wants to hear,” Crit Thomas, global market strategist with Touchstone Investments told MarketWatch.
“Stepping back, investors are dealing with a mixed bag,” when looking at economic data and corporate earnings, he added. “Fiscal stimulus is starting to wane. I believe we are late cycle and we’re at an all-time high in terms of profit margins, which creates uncertainty. At the same time, the consumer is employed, wages are growing and confidence is high.”
“Following the White House’s attempt to tighten the trade screws on China via blacklisting Huawei last week…the U.S. government has rowed back slightly on the issue,” wrote Connor Campbell, financial analyst at Spreadex in a Tuesday note.
“Now Huawei has 90 days to continue doing business with its American manufacturers, in order to get its house in order and ‘determine appropriate long term measures’ for those providers that rely on the company’s equipment before it occupies a more permanent . . spot on the U.S. Entity List,” he added. “Though this reversal is arguably a sign of a government working purely on impulse rather than considered strategy, the markets were buoyed by the perceived — if potentially brief — cooling of trade tensions.”
How are other markets trading?
Stocks in Asia traded mostly higher, with China’s Shanghai Composite Index SHCOMP, +1.23% gaining 1.2%, while Japan’s Nikkei 225 NIK, -0.14% slipped 0.1%. European stocks SXXP, +0.50% were moving higher.
Among commodities, the price of oil CLM19, -0.21% was flat, while gold GCM19, -0.24% slipped and the U.S. dollar DXY, +0.01% edged higher.
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https://www.marketwatch.com/story/us-stock-futures-hint-at-rebound-as-investors-watch-trade-headlines-2019-05-21
2019-05-21 15:15:00Z
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