U.S. stock markets closed mostly lower on Thursday as arrest of Chinese tech-behemoth Huawei’s CFO in Canada significantly dented investors’ hope of a solution to trade-related concerns. However, markets recovered to a significant extent following news that the Fed may reconsider its aggressive rate hike policy this month. Both the Dow and S&P 500 ended in the red while Nasdaq Composite finished in the positive territory.
The Dow Jones Industrial Average (DJI) closed at 24,947.67, declining 0.3%. The S&P 500 Index (INX) dropped 0.2% to close at 2,695.95. However, the Nasdaq Composite Index (IXIC) closed at 7,188.26, rising 0.4%. A total of 10.5 billion shares were traded on Thursday, higher than the last 20-session average of 7.9 billion shares. Decliners outnumbered advancers on the NYSE by 1.75-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.61-to-1 ratio. The CBOE VIX increased 2.2% to close at 21.19.
How Did the Benchmarks Perform?
The Dow ended in negative territory for the second straight day. The blue-chip index was down 785 points at its intra-day low. However, it recovered sharply and finally closed 79.40 points lower. This was the index’s biggest single-day reversal since Apr 4. Notably, 16 components of the 30-stock index closed in the red while 14 ended in the green.
The S&P 500 also closed in the red for the second successive day. The Energy Select Sector SPDR (XLE), Financials Select Sector SPDR (XLF) and Materials Select Sector SPDR (XLB) lost 1.8%, 1.4% and 1.4%, respectively. However, the Real Estate Select Sector SPDR (XLRE) and Communication Services Select Sector SPDR (XLC) gained 2.7% and 1.1%, respectively. Notably, five out of 11 sectors of the benchmark index closed in the red while six finished in the green.
However, the tech-heavy Nasdaq Composite closed in the green reversing its previous trading day’s loss. At its intra-day low, the tech-laden index was down 174 points. However, it closed after gaining 29.83 points, recording its widest single-day swing since April.
All three major indexes are currently in positive territory year to date.
Canada Arrests CFO of Huawei Technologies
On Dec 1, Canadian authorities in Vancouver arrested Meng Wanzhou, Huawei Technologies Co.’s chief financial officer and daughter of its founder Ren Zhengfei. Her detention was done at the request of the U.S. government for alleged violations of Iranian sanctions by Huawei Technologies Co. Notably, Huawei is the largest telecom and high-tech computer equipment maker of China and a close competitor of several large U.S. firms in these fields.
Meng’s arrest is likely to intensify eight-month old trade-related conflict which resulted in imposition of billions of dollars of tariffs by both the United States and China. Investors have already become skeptical regarding a permanent solution to the ongoing trade war. On Dec 1, the U.S. President Donald Trump and his Chinese counterpart Xi Jinping reached an initial agreement per which the trade truce will be valid for next 90 days.
However, confusion has arisen about the starting date of the truce period and China’s intentions of taking adequate measures to stop technology theft from the United States and the extent to which it will provide concessions to reduce trade imbalance between the two countries.
Consequently, shares of trade-sensitive stocks like The Boeing Co. (BA – Free Report) and Apple Inc. (AAPL – Free Report) declined 3.1% and 1.1%, respectively. The Boeing carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fed Mulling Over Soft Monetary Stance
On Dec 6, The Wall Street Journal reported that the Fed is considering a “wait-and-watch” approach after a possible fourth rate hike this year in December. Fed officials are uncertain about whether to continue with rate hikes in 2019. The Fed’s emerging “data dependent” plan may force the central bank to refrain from hiking benchmark rates in March 2019 and consider broader macro-economic variables to formulate policies about future rate hikes.
On Dec 6, the Institute for Supply Management (ISM) reported that service index for November stood at 60.7%surpassing the consensus estimate of 59.2% and October reading of 60.3. The November Services index reading was the second highest in 13 years.
The Department of Labor reported that U.S. productivity in the third quarter increased slightly to 2.3% from 2.2% reported earlier. The new figure was in line with the consensus estimate. Unit-labor costs were revised downward to a 0.9% increase from a previous estimate of a 1.2% gain. The new estimate also came in below the consensus estimate of 1.1%.
The Department of Commerce reported that U.S. factory orders dropped 2.1% in October, higher than the consensus estimate of a fall of 1.8%. Factory order for September was also revised downward to a growth of 0.2% from the previous estimate of a 0.7% increase.
The Department of Labor reported thatInitial jobless claims dropped by 5,000 to a seasonally adjusted 231,000 for the week ended Dec. 1, exceeding, the consensus estimate of 224,000. The number of people already collecting unemployment benefits, known as continuing claims, declined by 74,000 to 1.63 million.
Stocks That Made Headline
Chevron Unveils $20B Capital Expenditure Budget for 2019
Chevron Corporation (CVX – Free Report) recently announced its capital and exploratory spending program for 2019. (Read More)
Cooper Companies Earnings Miss & Revenues Beat in Q4
The Cooper Companies Inc. (COO – Free Report) reported fourth-quarter fiscal 2018 earnings of $2.87 per share, missing the Zacks Consensus Estimate by 3%. (Read More)
lululemon Tops Q3 Earnings & Sales Estimates, Ups View
lululemon athletica inc. (LULU – Free Report) delivered solid third-quarter fiscal 2018, with sales and earnings surpassing estimates and improving year over year. (Read More)
Michaels Companies Tops Q3 Earnings & Sales, Ups View
The Michaels Companies, Inc. (MIK – Free Report) has delivered strong third-quarter fiscal 2018 results, wherein top and bottom lines beat estimates and improved year over year. (Read More)
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