Dow rebounds 150 points after Trump predicts a quick resolution to trade war

Stocks opened higher on Friday after President Donald Trump said the ongoing trade war could be over quickly, but equities were still on pace to close lower for the week.

The Dow Jones Industrial Average rose 150 points while the S&P 500 gained 0.5%. The Nasdaq Composite outperformed, climbing 0.7%. The Dow fell more than 280 points on Thursday, while the S&P 500 and Nasdaq both lost more than 1%.

Amazon shares contributed to Friday’s gains, rising 1% after an analyst at Piper Jaffray said the company’s stock could reach $3,000 in two years. Dow Inc added to the gains, climbing 1.4% after J.P. Morgan upgraded the stock to neutral from underweight. Trade bellwethers Boeing and Caterpillar rose 1.9% and 0.8%, respectively.

Trump told reporters on Thursday afternoon he expected the U.S.-China trade war to end swiftly. He also noted a trade deal with China could lift tough restrictions on the Chinese telecom giant Huawei.

The president’s comments lifted market sentiment at a time when investors are growing more convinced that the trade war will take longer than expected to conclude. The Dow and S&P 500 came into Friday’s session down more than 1% each for the week while the Nasdaq had lost 2.4%.

Crude prices are down more than 6% this week as trade worries spilled over to other markets. Investors also loaded up on Treasurys this week. On Thursday, the 10-year Treasury note yield fell to its lowest level since October 2017.

“It seems, for the moment, [trade] is the only thing investors are thinking about,” said Mike Bailey, director of research at FBB Capital Partners. “You’ve got this one narrow issue that’s basically spreading across the entire market.”

“Investors had been hoping for more certainty,” Bailey said. “Instead, they’re getting more uncertainty across the board.”

Energy and tech were the worst-performing sectors for the week coming into Friday. The energy sector is down 3.6% through Thursday’s close while tech — the largest S&P 500 sector by market weight — had lost 2.8%.

Chipmakers led tech down this week as the VanEck Vectors Semiconductor ETF (SMH) dropped 5.1%. Qualcomm and Broadcom are the worst-performers in the ETF this week, dropping 16.3% and 10.3%, respectively.

Apple shares also contributed to the tech losses as several analysts raised concern over the company’s exposure to China. The stock is down nearly 5% this week.

“The growing worries around a US/China elongated trade battle and its implications on the tech space are heavily weighing on the minds of both investors and the companies themselves caught in the cross hairs,” Dan Ives, analyst at Wedbush Securities, wrote in a note to clients. “The ‘poster child’ for the US/China trade wars continue to be Apple with the stock under heavy pressure as many competitors are yelling fire in a crowded theater around the potential China impact to Cupertino if this situation worsens.

CNBC

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya