Markets Shrug Off Trade Tensions, Russell 2000 Small-Cap Index Up For 7th Week In A Row

The markets closed modestly lower on Friday, but near their highs of the day. And for the week, we saw gains in the S&P 500 (4th week in a row), the Nasdaq (4th week in a row), and the Russell 2000 Small-Cap Index (7th week in a row). And the Nasdaq and Russell both set new all-time high weekly closes.

In spite of the US announcing 25% tariffs on $50 billion worth of Chinese goods on Friday ($34 billion at first to take effect on July 6th, with the remaining $16 billion still under review), and China saying they will retaliate commensurately in both scale and speed, the markets shrugged off the news believing a full blown trade war will be averted.

It will be interesting to see how this unfolds and to watch how the #1 and #2 economies hash this out. But the markets seem to be taking it all in stride. And given the strength in the economy, it's easy to see why.

But the markets won't be as forgiving if these trade tensions start showing up in any of our economic numbers. For now however, that's not the case, and the markets are betting that they won't.

In other news, Friday's Empire State Manufacturing Survey jumped to 25.0 from last month's 20.1 and views for 19.1. Both new orders and backlogs were up, and analysts used the words "enormous strength" and "rising activity" to describe what's happening and the indications this has for the months ahead.

Consumer Sentiment was also up, coming in at 99.3 from last month's 98.0 and estimates for 98.5. The strength in this number points to a favorable Consumer Spending number later this month.

Another day, another set of reports underscoring the strength of the economy and the consumer. And that, in turn, should keep the market heading higher for quite some time.

Looks like it's going to be a great summer for stocks.

Best,

Kevin Matras

Executive Vice President, Zacks Investment Research

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