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Stock Market News For Oct 3, 2018

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U.S. stock markets were mixed on Tuesday as investors are busy weighing the positive and negative outcomes of trade-related developments. Moreover, socio-economic conflicts in European Union also compelled investors to speculate about their possible impact on the U.S. stock markets. Meanwhile, Fed Chairman’s comments eased market participants concerns about an impending inflation. On the stock index front - the Dow hit a record high, the S&P 500 was down marginally while Nasdaq Composite ended in negative territory.

The Dow Jones Industrial Average (DJI) closed at 26,773.94, advancing 0.5% or 122.73 points. However, the S&P 500 Index (INX) lost 1.16 points to close at 2,923.43. The Nasdaq Composite Index (IXIC) closed at 7,999.55, declining 0.5%. A total of 7.19 billion shares were traded on Tuesday, higher than the last 20-session average of 6.93 billion shares. Decliners outnumbered advancers on the NYSE by 1.54-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 2.16-to-1 ratio.  The CBOE VIX increased 0.4% to close at 12.05.

How Did the Benchmarks Perform?

The Dow ended in positive territory for the fourth straight day. Notably, the blue-chip index closed at record high breaking its previous record set on Sep. 21. During the day’s trading, the index hits its all-time high level of 26,824.78. Meanwhile, 23 components of the 30-stock index finished in the green while six ended in the red and one remained unchanged.

The S&P 500 was almost flat as a decline of 1.4% in the Consumer Discretionary Select Sector SPDR (XLY) was offset by a nearly similar increase in Utilities Select Sector SPDR (XLU). The tech-laden Nasdaq Composite closed in the red for the second successive day due to decline in large-cap tech stocks.

Trade-Related Concerns are Easing

At present, trade-related conflicts are somewhat easing. On Sep 30, the United States and Canada reached a landmark deal, which replaces the North American Free Trade Agreement (NAFTA). The new trilateral agreement will now be called the United States-Mexico-Canada Agreement (USMCA). Notably, Mexico has already given its nod in the August.

The USMCA is very important for strategic reasons as these two countries are immediate neighbors of the United States. Moreover, Canada is the second largest trading partner of the United States. Additionally, Trump administration is hopeful that its tariff-related conflicts with the European Union will be settled amicably.

Consequently shares of trade-sensitive stocks like The Boeing Co. (BA - Free Report) , Caterpillar Inc. (CAT - Free Report) and Intel Corp. (INTC - Free Report) increased 1.1%, 1.7% and 3.6%, respectively. Caterpillar carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, trade relations between the United States and its largest trading partner China remains a major concern. The United States slapped tariffs worth of $250 billion on Chinese goods while China retaliated with $110 billion tariffs on U.S. exports. President, Trump has threatened to impose a new set of tariffs worth $267 billion on Chinese goods if the situation demands.

Socio-Economic Conflicts in Europe

Political conflicts between the Italy and European Union intensified this week. The coalition government of Italy headed by the Northern League and the Five Star Movement has decided to set Italy’s budget deficit at 2.4% of GDP. This will enlarge the country’s already poor debt-to-GDP ratio which was pegged at around 132% last year.

The European Union has urged Italy to follow fiscal prudence failing which it fears the value of Euro will be affected. However, Italy accused the EU of imposing "economic terrorism" by linking the economic conditions of both Italy and Greece on the same platform. EU’s behavior has raised the cost of funds of the country, it alleges.

Meanwhile, in the UK, at the ongoing annual conference of the Conservative Part, delegates are discussing the new proposals of Prime Minister Theresa May about future UK-EU relations. The EU has already rejected these proposals.

Inflationary Concerns Overblown

On Oct 2, the Federal Reserve Chairman Jerome Powell stated that the inflation is under control and unlikely to be exaggerated in near future despite a tight labor market with historically-low unemployment and rising wages. The Fed which raised interest rate thrice this year has already hinted that the central bank may go for fourth hike in 2018 and thrice in 2019.

Economic Data

U.S. auto sales were down sharply in September. Car sales of General Motors and Ford declined 11% and 11.2%, respectively, year over year. However, Fiat Chrysler reported a 15% year over year jump in sales boosted by strong sales of Jeep and Dodge branded products.

Stocks That Made Headline

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Delta Down on Investor Update, Hurricane Florence to Hurt Q3

Shares of Delta Air Lines Inc. (DAL - Free Report) declined 3.4% to $54.69 on Oct 2, after the company disclosed that it anticipates Hurricane Florence to hurt third-quarter pre-tax income by around $30 million. (Read More)

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