US Stock Market Overview – Stocks Rise Led by Financials – Semis Weigh on the Tech Sector

Durable goods orders were softer than expected
David Becker
USA/Chinese Flag - Old Exective Office Building, Washington, D.C.

 

US stocks rebounded on Friday, after dropping on Thursday. Sectors were mixed, led higher by Financial as yields rebounded slightly despite a weaker than expected Durable Goods report revealed by the Commerce Department on Friday. Semi conductor stocks continued to move lower, with Qualcomm leading the way down. Qualcomm during the week has a verdict go against the company and in favor of the FTC. Additionally, The US government placed Huawei on a trade blacklist last week, effectively banning US firms from doing business with the world’s largest telecom network gear maker. Since Huawei is a large purchaser of semi conductors that are sold from US companies, the entire sector traded under pressure.

The trade war with China continued to heat up on Friday. China on Friday denounced US Secretary of State Mike Pompeo for fabricating rumors about Chinese government ties to Huawei. The US government placed Huawei on a trade blacklist last week, effectively banning US firms from doing business with the world’s largest telecom network gear maker. Huawei has repeatedly denied it is controlled by the Chinese government, military or intelligence services. Secretary Pompeo, rebuked Huawei CEO Ren Zhengfei’s assertions that his company would never share user secrets, and said he believed more American companies would cut ties with the tech giant.

Business Investment is Declining

The Commerce Department on Friday reported that their proxy for business investment moved lower which is a further sign of a drop in growth in the US in the Q2. The Commerce Department reported that orders for non-defense capital goods excluding aircraft, dropped 0.9% last month as demand weakened almost across the board. Data for March was revised down to show capital goods orders rising 0.3% instead of increasing 1.0% as previously reported. Expectations were for core capital goods orders to fall 0.3% in April. Core capital goods orders increased 2.6% on a year-on-year basis.

Shipments of core capital goods were unchanged last month after a downwardly revised 0.6% decline in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

Order for durable good which last for more than 3-year dropped

2.1% in April after increasing 1.7% in the prior month. Orders for transportation equipment dropped 5.9% after rising by 5.9% in March. Orders for motor vehicles and parts decreased by 3.4% last month, the most since May 2018. Orders for non-defense aircraft plunged 25.1% after rising 7.8% in March. Boeing reported on its website that it had only four aircraft orders in April, down from 44 in March. Orders for machinery edged up 0.1% after dropping 2.0% in March. Orders for computers and electronic products fell 0.4%.

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