The United States and China have agreed to hold off new tariffs, sending the stock market higher. In fact, receding possibility of any collateral damage from the trade war helped industrial and technology stocks gain in particular. Thus, investing in such stocks seem to be a wise move for now.
What’s Driving the Markets?
The broader stock market recently enjoyed a healthy run, with the Dow Jones Industrial Average seeing its best June in more than 80 years. The blue chip index rose 7.2%, according to Dow Jones Market Data. Also, the S&P 500 and Nasdaq notched record June returns.
No doubt, the rally was partly supported by Fed’s easier monetary policy stance along with the U.S.-China trade truce. U.S. President Donald Trump and Chinese President Xi Jinping met over the weekend at the G-20 summit in Japan, where they have mutually decided not to impose tariffs against each other’s commodities.
Trump said that no additional tariffs on billions of dollars of Chinese products will be applied for the ‘time being.” Also, the economies will surely work a deal. To top it, six weeks after Huawei was blacklisted by the White House, Trump took a complete U-turn. He said that the U.S. companies “can sell their equipment to Huawei.” This development certainly eased trade dispute since it was one of the major flash point in the conflict.
Potential Winners as U.S.-China Work Out Trade Truce
A truce between two of the world’s largest economies has alleviated risks in the equity market for now. A full-blown trade war would have had rippling effects on the global economy growth, casting a pall over businesses. Let us now look at stocks that have benefitted from the easing trade tensions:
Industrials Tread Higher
As mentioned earlier, progress in trade talks has helped the Dow Jones Industrial Average cement the best June gain since 1938. And the biggest gainer among all the Dow components will certainly be Boeing Company BA. After all, the aerospace giant sells about a fourth of its commercial aircraft to Chinese customers.
And how can we forget that China had threatened to impose tariffs on several American products, including airplanes if there is no trade truce. Such a move could easily affect Boeing’s 737-800, 737-700 and 737-900 ER models. But, with tariff scares behind us for now, Boeing has ample reasons to rejoice.
Tech Stocks Make Merry!
Within the Dow, Intel Corporation INTC in particular is expected to gain immensely. And why not? Intel more or less generates bulk of its revenues from China, and it’s more than what the semiconductor company makes in the United States. China, in fact, heavily relies on U.S. chipmakers, while semiconductors make up one of its largest import categories in terms of value. Hopes of abatement in U.S.-China trade tensions provided strength to the chip sector.
Elsewhere in the chip sector, shares of KLA-Tencor Corp. KLAC, Lam Research Corp. LRCX, and Micron Technology, Inc. MU ended in the positive territory.
The broader tech sector has also a lot to gain from reduced trade war fears. The components of the SPDR Technology Select Sector had seen significant amount of revenues coming from China in recent years. In fact, China is in the second place in terms of revenue generation, behind the United States.
5 Top Gainers
As trade war worries dissipate and broader markets move north, investing in stocks from the aforesaid sectors making the most of the recovery seems judicious. We have, thus, selected five stocks that can make the most of the encouraging trend. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Caterpillar Inc. CAT manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company has a Zacks Rank #2. In the last 60 days, one earnings estimate moved up, while none moved lower for the current year. The Zacks Consensus Estimate for earnings has risen 0.1% in the same period. The company, which is part of the Manufacturing - Construction and Mining industry, is expected to post earnings growth of 9.2% for the current year.
Roper Technologies, Inc. ROP designs and develops software, and engineered products and solutions worldwide. The company has a Zacks Rank #1. In the last 60 days, two earnings estimates moved up, while none moved lower for the current year. The Zacks Consensus Estimate for earnings has risen 1.8% in the same period. The company, which is part of the Manufacturing - General Industrial industry, is expected to record earnings growth of 9.4% for the current year.
Cisco Systems, Inc. CSCO designs, manufactures, and sells Internet Protocol based networking and other products related to the communications and information technology industry worldwide. The company has a Zacks Rank #2. In the last 60 days, 12 earnings estimates moved up, while one moved lower for the current year. The Zacks Consensus Estimate for earnings has climbed 0.7% in the same period. The stock’s expected growth rate for the current year is 18.5% versus the Computer - Networking industry’s estimated decline of 7.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amtech Systems, Inc. ASYS manufactures and sells capital equipment and related consumables for use in fabricating solar cells, light-emitting diodes (LEDs), and semiconductor devices worldwide. The company has a Zacks Rank #1. In the last 60 days, two earnings estimates moved up, while none moved lower for the current year. The Zacks Consensus Estimate for earnings has risen 7% in the same period. The stock’s expected growth rate for the next quarter is 104.4% versus the Semiconductor - General industry’s estimated decline of 22.2%.
Intuit Inc. INTU provides financial management and compliance products and services for small businesses, consumers, self-employed, and accounting professionals in the United States, Canada, and internationally. The company has a Zacks Rank #2. In the last 60 days, nine earnings estimates moved north, while one moved south for the current year. The Zacks Consensus Estimate for earnings has risen almost 2% in the same period. The stock’s expected growth rate for the current year is 19.4% versus the Computer - Software industry’s estimated gain of 4.8%.
The Hottest Tech Mega-Trend of All
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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
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Amtech Systems, Inc. (ASYS) : Free Stock Analysis Report
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