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Stocks Wobble As Trade Worries Ail Sentiment

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Monday, August 6, 2018

U.S. stock index futures were marginally lower on Monday. Strong performances by U.S. corporates in the second-quarter were overshadowed by lingering trade conflict between the United States and China. Berkshire Hathaway Inc.’s (BRK.B - Free Report) earnings per share for the second quarter 2018 were $4.87, up 182% year over year. Newell Brands Inc. (NWL - Free Report) , SeaWorld Entertainment Inc. (SEAS - Free Report) , Sotheby's (BID - Free Report) and Tyson Foods Inc. (TSN - Free Report) will release earnings before the open.

On Aug 3, China threatened to impose $60 billion of tariffs on U.S. goods in retaliation against Trump administration’s decision to impose 25% tariff on Chinese exports. Meanwhile, ongoing global trade conflict has taken a toll on German manufacturing orders which plunged 4% in June compared with May.

Wall Street ended sharply higher on Friday. Strong second-quarter earnings results have helped investors to ignore renewed trade conflicts between the United States and China and weaker-than-expected non-firm payroll data for July. All three major indexes closed in positive territory.

The Dow Jones Industrial Average (DJI) closed at 25,462.58, gaining 0.5% or 136.42 points. The S&P 500 Index (INX) also increased 0.5% to close at 2,840.35. The Nasdaq Composite Index (IXIC) closed at 7,812.02, advancing 0.1%. A total of 5.96 billion shares were traded on Friday, lower than the last 20-session average of 6.29 billion shares. Advancers outnumbered decliners on the NYSE by 1.51-to-1 ratio. However, on the Nasdaq, decliners had an edge over advancers by 1.41-to-1 ratio.  The CBOE VIX decreased 4.5% to close at 11.64.

For the Dow, 27 components of the 30-stock blue-chip index closed in the green, while only 3 finished in the red. The tech-heavy Nasdaq Composite also rose buoyed by strong performance of large-cap tech giants.

The S&P 500’s gain was led by a 1.3% increase in Real Estate Select Sector SPDR (XLRE) and 1.2% rise in Consumer Staples Select Sector SPDR (XLP). Notably, 10 out of 11 sectors of the benchmark index closed in the green while 1 ended in the red.

U.S. corporates have so far posted robust results for the second-quarter 2018, maintaining the terrific earnings momentum which was started since the first-quarter 2018. In the second-quarter, total earnings of S&P 500 companies are expected to be up 23.9% from the same period last year on 9.3% higher revenues.

Tech behemoth Apple Inc. (AAPL - Free Report) , which became the first publicly traded U.S. company to cross a market cap of $1 trillion on Aug 2, further extended its gain on the last day of the week. On Friday, share price of Apple rose 0.3%. Apple carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

On Aug 3, the Chinese government threatened United States to impose tariffs on $60 billion of U.S. goods if the Trump administration goes ahead with its plan to impose new import duties on Chinese exports.

China’s Ministry of Commerce unveiled a list of 5,200 American products on which tariffs can be charged within the range of 5% to 25%. Most of these products are from meat, chemicals, leather products and auto-parts industries.

On Aug 3, The Labor Department reported that the U.S. non-firm job additions increased by 157,000 for the month of July, missing the consensus estimate of 192,000. However, job additions for May and June were revised upward by a combine 59,000.

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