Earnings Lift U.S. Equities, Trade Tensions Cap Gains, Strong Data Supports Market

The U.S. equities rise as strong earnings and data support the market, but the gains were capped by escalating trade tensions.
Thomas Hughes
Historic buildings of the financial district in lower Manhattan, New York City

Strong Earnings Lift Stocks While Trade Tensions Cap Gains

A round of strong earnings reports from index heavyweights has the U.S. futures moving higher in early trading. The Dow Jones Industrial Average led the gain with an advance near 0.25% followed closely by the broad-market S&P 500. The tech-heavy NASDAQ Composite was closer to break-even than not on escalating trading tensions. Today’s biggest names in earnings are Cisco and Walmart. Both companies reported better than expected, Cisco raising full-year guidance, and shares of both stocks moved higher. Cisco led with a gain of 3.5%, Walmart was up about half that much.

In trade news, tensions are on the rise as Trump and his administration target Chinese tech. Trump declared a national emergency on Wednesday citing risks associated with foreign technology. Shortly afterward the Commerce Department put embattled Chinese firm Huawei on the BIS list. The BIS list, the Bureau of Industry and Security, will make it harder for Huawei to do business in the U.S. Chinese media is saying China can withstand any pressure put on it by the U.S.

In economic news, Housing Starts, Building Permits and the Philly Fed MBOS were all better than expected. Housing starts rose by a strong 5.7% beating consensus estimates for a gain of 5.3%. The increase is fueled by declining interest rates and pent-up demand. The Philly Fed’s MBOS came in at 16.6 versus an expected 10 and is up double the last month’s read as U.S. business accelerate expansion plans.

EU Markets Move Higher Despite Trade Tensions

The EU markets were moving higher in early trading and at the highs of the day just before midday. The DAX was in the lead with a gain of 0.68% and followed by a near 0.30% advance in the CAC and FTSE. While trade tensions are capping gains in the region traders are still optimistic. Trump’s decision to postpone imposing tariffs on auto imports by six months staves additional economic burden in the near term.

In stock news shares of ThyssenKrupp were at the top of the listings just days after its plans to IPO a key unit fell apart. The move is driven by news Danish Kone will put in an offer to buy the elevator unit, a move good for both companies. Shares of Kone advanced 4.0% on the news, shares of ThyssenKrupp gained 6.9%.

In Brexit news, members of Theresa May’s own Conservative Party have threated to downvote her Brexit deal. The deal is expected to be reintroduced to Parliament early next month and is the only alternative to no-Brexit or hard-Brexit.

Asian Markets Mixed, Trade Tensions In Focus

Asian markets were mixed in Thursday trading. The biggest move was posted by the Korean Kospi, -1.20%, while most indices moved about 0.6% if in differing directions. The Hong Kong Hang Seng was the least volatile of the bunch trading just above break-even. Autos were among the most heavily traded stocks but the performance was mixed. The news from Washington and Beijing giving investors little confidence trade relations will be fixed soon.

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