Dow Jumps 1.4% This Week on Potential Trade Talks
Another potentially positive piece of trade news on Friday helped stocks to finish this crazy week in the green.
Now it looks like the U.S. and China are working on a summit between President Trump and Chinese President Xi Jinping in November. This comes just one day after news of “lower-level” trade talks between the two countries set for next week.
So we’ve gone from underlings to the bigwigs themselves in just one day! Too bad there’s no guarantee that these meetings will actually take place, nor is there great optimism that they will end the dueling tariffs between the two economic powerhouses.
Nevertheless, the Dow is so concerned about a trade war that even the possibility of talks provides more than enough reason to rise. On Friday, the index followed up yesterday’s nearly 400-point surge by adding an additional 110 points. It gained 0.43% to 25,669.3, bringing its weekly advance to 1.4%.
The S&P increased 0.33% to 2850.1 today and rose 0.6% for the week.
The NASDAQ was in negative territory most of the session, but managed to finish with a slight advance of 0.13% to 7816.3. This index had other things to worry about though, especially weak guidance from NVIDIA (-4.9%) and Applied Materials (-7.7%) yesterday that have many wondering if the long love affair with chip stocks may be coming to an end. (Value Investor has a lot more on this in the highlights section below).
Plus, the Elon Musk story continued on Friday when the Tesla CEO gave an interview to The New York Times and talked about all the stress he was under. This news had the media wondering more than ever if he should step down from running the electric car company. The stock was down 8.9% today.
While the NASDAQ managed to finish the day in green, it was down 0.3% for the week.
Today's Portfolio Highlights:
Value Investor: “Has the story changed?” That’s the question Tracey always asks when thinking about selling a long-term holding from an industry that’s been really hot. In the case of semiconductors, the answer to that question is...YES! Wall Street is wondering if this is the end of the cycle, and the problem is that no one knows the answer for sure. But we do know what the market does in times of uncertainty...it sells.
The editor felt this was a good time to get out of semiconductors and cash in some nice profits. On Friday, she sold:
• Micron (MU) for a 62.5% return
• Vishay Intertechnology (VSH) for a 62.5% return, and
• Applied Materials (AMAT) for a 33.4% return
It’s been a fun ride with this space and the best thing is that Tracey can revisit it in the future. For now though, she wants to protect these gains. Make sure to read her complete commentary for more these moves.
Surprise Trader: Shares of Foot Locker (FL) look to be recovering off the lows. And why shouldn’t it? The economy is strong and consumer trends are favorable. Dave likes the chances of this approximately $50 stock getting back to its June level of $58 and maybe more, especially since it has a positive Earnings ESP of more than 4% for the quarter coming before the bell on August 24. He added FL on Friday with a 12.5% allocation. Read the write-up for more.
Counterstrike: "Stocks were very choppy early on as it looked like markets were a bit weak. However, a headline came out around lunch time that helped the S&P push to the highs of the week. Here was the headline:
"'US China plot road map to resolve trade dispute by November, but talks may be hampered by US internal divisions per DJ'
"This gave traders a reason to buy thinking that Trump wants something done on tariffs. Don’t be surprised if there are concessions on both sides to make a deal work. If that happens, I would expect markets to continue higher into the end of the year.
"We continue to trade in a bullish channel, which was started in April. We are currently in the middle of this channel, which has upside all the way to 2920 in the S&P. I could see this scenario panning out as the market prices in a trade deal between the US and China." -- Jeremy Mullin
Have a Great Weekend,
Jim Giaquinto
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