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Stocks Rise Along with the Tariffs. Go Figure!

Jim Giaquinto

We just had the best performance of this rough week on the same day as the dreaded tariff hike.

The market never ceases to amaze!

Stocks may have taken a bark-is-worse-than-the-bite attitude on Friday, but we’ll have to keep our eyes on how the hike to 25% and ongoing trade negotiations will impact the market in the longer run.

For today though, the Dow boomeranged yet again from a loss of more than 350 points to a gain of 114. It finished higher by 0.44% to 25,942.37.

The other two major indices finished with their first greens of the week. The S&P advanced 0.37% to 2881.40 and the NASDAQ managed a 0.08% rise to 7916.94.

The week started under pressure with President Trump’s Twitter threat to raise tariffs as negotiations hit a brick wall. Despite a few late-day rallies (especially today), stocks were constantly behind the eight ball. In the end, the NASDAQ dropped 3% this week, while the Dow and NASDAQ were each off by more than 2%.

The bottom line is we still have no deal. We do have handshakes and smiles on the news… but nothing on paper. The market’s immediate response was to move sharply lower.

However, positive trade headlines still appear to be working. U.S. Treasury Secretary Steven Mnuchin and President Trump both said the talks were “constructive”, while China’s Vice Premier Liu He said that the meetings went “fairly well”.

So far, the tone seems to be that this impasse is no big deal… and the market decided to go with that. Stocks reversed course after the negative open and eventually finished higher. The market appreciated that talks have not broken down and that there will be future negotiations.

Moving into next week, a bunch of questions remain. What will China’s retaliation look like? When will the next round of talks happen? How much longer will the market remain relatively optimistic that something will eventually get done?

The answer to that last question probably has a lot to do with the health of the economy, which continues to be fantastic despite all this trade drama.

Today's Portfolio Highlights:

Insider Trader: Despite the uncertainty from increased tariffs, Tracey took a chance by adding fertilizer company Mosaic (MOS) on Friday. Shares are down 18.5% so far this year, but fertilizer prices have rebounded of late. Will this ongoing trade conflict with China beat the stock up even more? The CEO doesn’t think so, as he picked up 10,000 shares in a clear confidence buy earlier this week. The editor is willing to follow this insider’s lead. Tracey also sold three names today amid all this tariff turmoil, including Delta Air Lines (DAL) and Activision Blizzard (ATVI) for gains of 12.9% and 3.1%, respectively.

Surprise Trader: The tech sector looks due for a bounce according to Dave, especially if the market isn’t going to flip out over the increased tariffs. The editor thought this was a good time to buy Agilent (A), which is part of the very highly-ranked Electronics – Testing Equipment space (top 4% of the Zacks Industry Rank). The stock has a positive Earnings ESP of 2.1% for the quarter coming after the bell on Tuesday. The portfolio also sold Arconic (ARCN) for a return of 8.7% in less than 2 weeks. See the complete commentary for more.

Marijuana Innovators: Shares of Canadian cannabis producer CannTrust Holdings (CTST) more than doubled in the first three months of 2019, but they have since moved sharply lower. Dave sees the company as a great contrarian opportunity, so he added it to the portfolio on Friday. Of the $200 million it took in offering the new shares, CTST put $170 million of it into expanding production facilities. The editor was very impressed with that and believes this company is a bargain right now. Read his complete commentary for more specifics on this new buy.

Have a Great Weekend!
Jim Giaquinto

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