Wall Street closed sharply higher on Tuesday after the U.S. government provided temporary relief to Huawei Technologies, allowing it to import U.S. inputs for the time being. Last week, the Trump administration blacklisted Huawei from doing business with U.S. counterparts due to national security concerns. All three major stock indexes finished in the green.
The Dow Jones Industrial Average (DJI) gained 0.8% or 197.43 points to close at 25,877.33. The S&P 500 increased 0.9% to close at 2,864.36. Meanwhile, the Nasdaq Composite Index closed at 7,785.72, climbing 1.1%. The fear-gauge CBOE Volatility Index (VIX) decreased 8.3% to close at 14.95. A total of 6.09 billion shares were traded on Tuesday, lower than the last 20-session average of 6.97 billion. Advancers outnumbered decliners on the NYSE by a 3.56-to-1 ratio. On Nasdaq, a 2.30-to-1 ratio favored advancing issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory with 25 components of the 30-stock blue-chip index closing in the green while five finished in the red. The S&P 500 also closed in the green.The Technology Select Sector SPDR (XLK) and Materials Select Sector SPDR (XLC) surged 1.2% and 1.5%, respectively. Notably, eight out of eleven sectors of the benchmark index closed in the red while three finished in the green. Moreover, tech-heavy Nasdaq Composite ended in positive territory due to strong performance by trade-sensitive large-cap stocks.
Temporary Relief of Huawei
On May 21, the U.S. government said that it will provide a 90-day reprieve to Huawei before taking tougher trade measures. During these 90 days, the U.S. government will issue temporary licenses to U.S. suppliers of the Chinese telecom behemoth so that Huawei dose not face any immediate supply-chain management issue.
Several economists and market watchers are considering a decision on the part of the Trump administration to open a channel to find a meaningful solution to year-old trade spat between the two largest trading countries of the world.
Consequently, shares of major suppliers to Huawei such as Xilinx Inc. XLNX, Micron Technology Inc. MU and Alphabet Inc. GOOGL surged 4.6%, 3% and 0.9%, respectively. Xilinx carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, on May 15, President Donald Trump issued an executive order declaring a national emergency, preventing U.S. corporates from using information and communications technology equipment from sources which pose “an unacceptable risk to the national security of the United States”.
Following the order, the Department of Commerce added Chinese telecom behemoth Huawei Technologies and its affiliates to the Bureau of Industry and Security (BIS) Entity List. Another Chinese telecom giant ZTE may also face the same fate. The latest move by the U.S. government further jeopardized the lingering trade-related dispute between the two countries.
The National Association of Realtors reported that existing home sales declined 0.4% in April to a seasonally adjusted annual rate of 5.19 million. The consensus estimate was 5.34 million. The metric also declined 4.4% year over year.
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