Stock market futures for the S&P 500 index, Dow Jones industrial average and Nasdaq 100 rose strongly overnight after President Donald Trump tweeted that he will “always” be friends with China President Xi Jinping.
The S&P 500 index, Nasdaq composite and Dow Jones fell in volatile trade last week, but held above recent lows, so the stock market rally isn’t dead. Still, Apple (AAPL) and Netflix (NFLX), Microsoft (MSFT) and Micron Technology (MU) led a slew of stocks losing key support. New breakouts ran into trouble. The chip sector hit new lows. Looking ahead, investors will stay focused on trade war news and Facebook (FB) as CEO Mark Zuckerberg goes before Congress.
Stock Market Futures
S&P 500 index futures rose 0.7% vs. fair value. Stock market futures indicated a 0.8% advance for the Dow Jones and 1.1% for the Nasdaq 100. Keep in mind that stock market futures don’t always predict how the major averages will trade in the following session.
Trump: China’s Xi ‘Always’ A Friend
President Donald Trump tweeted Sunday that “China will take down its Trade Barriers because it is the right thing to do.” He expressed confidence that he’ll “always be friends” with China President Xi Jinping.
President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!” — Donald J. Trump (@realDonaldTrump) April 8, 2018
Trump late Thursday proposed imposing tariffs on an additional $100 billion in Chinese goods after Beijing quickly retaliated vs. the U.S.’ initial 25% tariff on $50 billion of Chinese wares.
President Xi will give a major economic address on Tuesday. He’s expected to propose reforms and to open up the economy further. But he’ll want to avoid appearing to give in to Trump’s tariff threats.
Friday’s Market Sell-Off Broad
The S&P 500 index and other major averages rose Tuesday-Thursday, a hopeful win streak though it came on increasingly light volume. But the rally wasn’t confirmed. On Friday, stocks sold off sharply as China trade war fears revived. Fully 191 of the 197 industry groups that IBD tracks declining. That includes apparel makers, clothing retailers, defense firms and homebuilders, which have been among the pockets of strength in a bad market.
Recent breakouts Five Below (FIVE), Vipor Energy Partners (VNOM), fell back below buy points on Friday.
50-Day Support Lost
Apple, Microsoft, Netflix and Micron Technology undercut their 50-day lines Friday. So did UnitedHealth (UNH), Chevron (CVX), McDonald’s (MCD), Salesforce.com (CRM), Mastercard (MA), Square (SQ), General Dynamics (GD) and Lockheed Martin (LMT).
Apple, Microsoft, UnitedHealth, Chevron and McDonald’s are all Dow Jones stocks.
Micron has been the big chip leader, so its near-round trip of a sizable rally was one more bad sign for the sector . The Philadelphia Semiconductor Index undercut its recent lows on Friday. It’s hard for the market to have a strong rally without chips taking part in some fashion.
Netflix has been the best-performing FANG stock, so its retreat was discouraging.
Meanwhile, Facebook has been the worst-performing FANG stock, plunging well below its 200-day moving average over the Cambridge Analytica data scandal.
Facebook investors have to hope CEO Zuckerberg will put on a better performance than the stock in congressional hearings on April 10-11.
Zuckerberg will have to persuade lawmakers and the public that the social giant will do a better job of protecting users’ privacy. But he also must strike a balance with efforts to rein in fake news and extremist beliefs. For investors, want to make sure that Facebook can still generate massive ad revenue from user data.
Facebook on Sunday suspended another data-analytics firm, Cubeyou, amid allegations that the company mishandled users’ data.
Stock Market Outlook
The market will eventually confirm a new uptrend. But that could be on Monday, next week, next month or next year. Don’t try to guess what the stock market will do, listen to what it’s saying.
