Back to top

Image: Bigstock

On Chinese Concessions, Small Caps and Lowe's New CEO

Read MoreHide Full Article

Tuesday, May 22, 2018

With a Chinese-American “trade war” averted for now — although many, like Zacks Exec VP Kevin Matras, have long argued we were never going to wind up in one anyway — market indexes have breathed easier, with the Dow up nearly 300 points to close above 25K from the first time since all-time highs were being scaled early this year. In fact, all major indexes closed in the green yesterday, and look to build modestly on those levels in today’s pre-market.

Specifically, China has agreed to lower its tariff on imported U.S. autos from 25% to 15%, and this followed concessions made by President Trump that lifts a trade ban to Chinese telecom giant ZTE. Perhaps we’ll see more specifics regarding the trade environment between the world’s two largest economies, but ultimately, until things like Intellectual Property and the respect thereof are addressed, don’t expect much by way of seismic shifts in our trade relationship with China. That said, pressures the markets have felt since Trump’s decision 12 weeks ago to crank up tariffs on steel and aluminum are finally feeling some relief, and it shows.

For more on this subject, check out a new Zacks article on Chinese-American trade relations: U.S.-China Work Out Trade Truce: 5 Top Winners

Elsewhere, we see the Russell 2000 continue to make gains relative to the major U.S. indexes. Though this large group of small-cap stocks only accounts for not even 10% of publicly traded domestic market cap, many analysts look at trades into small-caps as a “risk-on” environment, which naturally supports bullish market sentiment, and may key another leg up on the Dow, Nasdaq and S&P 500.

In company-specific news, J.C. Penney has lost its CEO Marvin Ellison, effective immediately, as the chief of the beleaguered department store retailer has accepted the CEO role at home improvement major Lowe’s (L - Free Report) this summer. This has caused JCP shares to plummet yet another 8.4% in today’s pre-market, down to barely north of $2 per share — levels not seen since the 1980s, and a universe away from its peak a year prior to the Great Recession over a decade ago of more than $82 per share. Fortunes for the long-suffering retailer may now be in doubt.

For Lowe’s, which had seen its all-time highs back in the heady January 2018 days, this morning’s news is being received quite well, to the tune of +2.8% in share price. The Zacks Rank #3 (Hold) specialty retailer expects to benefit from Ellison’s tenure at rival Home Depot (HD - Free Report) prior to his station as head of J.C. Penney. Current-year earnings estimates — prior to this move — were for the company to make $3.50 per share, up 22% from 2017.

Mark Vickery
Senior Editor

Questions or comments about this article and/or its author? Click here>>

5 Medical Stocks to Buy Now

Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia and other conditions.

New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.

Click here to see the 5 stocks >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


The Home Depot, Inc. (HD) - free report >>

Loews Corporation (L) - free report >>