U.S. stocks closed higher on Monday supported by strong second quarter earnings results. Robust economic fundamentals along with better-than-expected performance by U.S. corporates enabled investors put aside trade related and geopolitical conflicts at least for the time being. All three major indexes closed in positive territory.
The Dow Jones Industrial Average (DJI) closed at 25,502.18, gaining 0.2%. The S&P 500 Index (INX) increased 0.4% to close at 2,850.40. The Nasdaq Composite Index (IXIC) closed at 7,859.68, advancing 0.6%. A total of 5.95 billion shares were traded on the first day of the week, lower than the last 20-session average of 6.29 billion shares. Advancers outnumbered decliners on the NYSE by 1.47-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.61-to-1 ratio. The CBOE VIX decreased 3.2% to close at 11.27, its lowest close since late January.
How Did the Benchmarks Perform?
For the Dow, 23 components of the 30-stock blue-chip index closed in the green, while only 7 finished in the red. The tech-heavy Nasdaq Composite has recorded five straight winning streaks, first time since May.
The S&P 500’s gain was led by a 1% increase in Communication Services Select Sector SPDR (XLC), 0.7% rise in Consumer Discretionary Select Sector SPDR (XLY) and 0.6% gain in Technology Select Sector SPDR (XLK). Notably, nine out of 11 sectors of the benchmark index closed in the green while 2 ended in the red.
Strong Earnings Momentum
U.S. corporates have so far posted better-than-expected earnings results for the second-quarter 2018. Including before market open releases of Aug 6, 410 S&P 500 members have already reported their quarterly results. Total earnings for these companies are up 24.9% from the same period last year on 10.1% higher revenues.
Berkshire Hathaway Inc. (BRK.B - Free Report) posted second-quarter 2018 adjusted earnings per share of $2.79, improving 67.3% year over year and surpassing the Zacks Consensus Estimate of $2.27. Revenues increased 8.6% year over year to $62.2 billion. (Read More)
Tyson Foods Inc. (TSN - Free Report) posted third-quarter fiscal 2018 non-GAAP earnings per share of $1.50, beating the Zacks Consensus Estimate of $1.33. Net sales improved 2% year over year to $10,051 million. (Read More)
Consequently, share price of Berkshire Hathaway and Tyson Foods were up 2.9% and 3.3%, respectively. Berkshire Hathaway carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Trade War Concerns Remain
The trade conflict between the United States and China continues to escalate with each passing day. U.S. government is likely to persist with protectionist measures against China as long as the world’s second largest economy continues to force U.S. corporates into joint ventures with Chinese companies to do business in the country. Moreover, China can no longer coerce U.S. companies to transfer technology in order to form joint ventures.
Last weekend, China’s Global Times newspaper, popularly known for its nationalistic views, reported that China is ready for a "protracted" trade war with the United States.
Moreover, as per CNBC, Trump administration may slap auto tariffs on Canada if ongoing NAFTA negotiations fail to provide fruitful results.
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