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Fed Reassures Economy, Trade Rhetoric Softens, Stocks to Consider in the Aftermath

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U.S. stocks experienced a surge today in the aftermath of Fed chairman Jerome Powell stating the central bank was willing to ease monetary policy if needed to stabilize the economy. The announcement came amidst the ongoing trade war between the U.S and some of its biggest sources of imports. During a press conference held in Chicago, Powell assured the public that the Fed is aware and monitoring current economic developments and will act accordingly to sustain the near-record economic expansion.

The Dow Jones Industrial Average, S&P 500, and the Nasdaq all rebounded today, each closing up over 2%; the Dow added 511 points. These index increases come as a sigh of relief after a lackluster May for the market as many stocks felt the ramifications of the heated trade rhetoric.

The positive news from the central bank was accompanied by China easing the tensions of the trade war. A spokesperson for China’s Ministry of Commerce released a statement that the trade dispute should be handled with “dialogue and consultation.” They followed up the statement by pointing out that these talks would need to be conducted with “respect, equality, and mutual benefit.”

The report comes after both sides recently escalated the dispute through threats of cutting off needed resources. The tariffs President Trump threatened to issue on some Mexican goods were followed by Mexican Foreign Minister Marcelo Ebrard stating that he believed the two countries could find common ground. The positive news lead to a surge in stocks that previously fell victim to the trade war rhetoric such as General Motors (GM - Free Report) and Ford (F - Free Report) . Major tech companies also felt the impact of the news and here are the ones to be most attentive to.

Apple

On Monday, Apple (AAPL - Free Report) announced upcoming product launch plans at its Worldwide Developer Conference. The company showcased new features it developed for iPhones, as well as its newest Mac Pro, which it presented as its most powerful computer to date. The highlight of the conference was the company’s new tool, “sign in with Apple.” It provides developers the option to add to apps that would allow users to log in without the creation of a username and password. According to Apple, this option doesn’t gather any personal information from the user. This feature distinguishes Apple from companies like Facebook, who are under scrutiny because of the lack of privacy it gives users. Shares of AAPL have gained 9.86% year-to-date, and the stock currently sits at a #3 (Hold) on the Zacks Rank.

Facebook

Facebook (FB - Free Report) has been under investigation for its privacy policies because of the data it collects from its users. Shares of the company took a hit Monday as antitrust regulation fears impacted the market; government threats to investigate big tech companies for violations of antitrust laws have made investors wary of delving into big tech stocks. Despite possibly facing regulatory sanctions from the government, analysts don’t believe it will affect the company’s fundamentals. Many analysts also don’t believe that the regulators will come down as hard as many perceive. Breaking up these tech conglomerates is unlikely as these investigations are in their early stages. This analyst sentiment as well as some positive estimate revision and Facebook’s Estimated Long-Term EPS Growth Rate of +20.20% give the social media giant a #2 (Buy) on the Zacks Rank. The company is also projected to see year-over-year earnings growth of +9.20% for the current fiscal quarter.

 

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