The Dow Jones Industrial Average is making back yesterday's losses on trade optimism and solid economic data. In today's Morning Movers, we...
•...explain why the market isn't worried about inflation; •...review Delta Air Lines' (DAL) earnings; •...highlight a Deutsche Bank upgrade of General Electric (GE).
The trade war has yet to show signs of hitting the economy, and that's good enough for the stock market this morning.
S&P 500 futures have advanced 0.6%, while Dow Jones Industrial Average futures have gained 189 points, or 0.8%. Nasdaq Composite futures have risen 0.6%.
The market's resilienc e leaves markets caught in a feedback loop. President Donald Trump won't stop pressing ahead with tariffs until the market drops. But the fact that the market won't drop means that the president will continue with tariffs. That means we could be stuck trading in a range for quite a while--unless China agrees to negotiate with Trump.
And that's what the bulls appear to be hanging their hats on. Tigress Financial's Ivan Feinseth, for one, observes that the China's Shanghai Composite has dropped 23% from its late January high, while the S&P 500 is off just 3.%%. That would appear to put pressure on China to negotiate, especially if U.S. economic data remain strong. "Economic data from both countries continue to support this as the U.S. economy remains strong and China's economy continues to show signs of weakness," he explains. "The test for the U.S. stock market will be if CEOs bring down forward guidance due to anticipated effects of increased trade tariffs as they report Q2 results."
So far so good. Delta Air Lines (DAL) reported better-than-expected earnings, and raised its dividend this morning, helping boost its shares after yesterday's selloff in the sector. Tomorrow brings earnings from Citigroup (C), JPMorgan Chase (JPM), and Wells Fargo (WFC).
And the U.S. certainly doesn't seem to be feeling the impact of a trade war just yet. The consumer price index rose 2.9% in June from a year ago, the fastest pace in six years. Excluding food and energy, so-called core CPI rose 2.3%, equaling last month's reading. The numbers might not be as strong as they look at first glance. BMO Capital Markets' Ian Lynge n notes that the three-month annualized rate now stands at 1.7%, the lowest since July 2017. "Troubling, but not enough to derail the Fed from its'gradual' path," he explains.
And perhaps that's why the stock market is celebrating this morning. With no sign of overheating, but no signs of trade-war damage either, perhaps this bull market can live a little longer.
Earnings & News
Broadcom (AVGO) is down 9.7% to $219.86 after announcing it plans to buy software vendor CA Inc. (CA), up 18.3% to $44.02.
Delta Air Lines (DAL) is up 1.7% to $50.70 after reporting second-quarter earnings. The airline earned $1.77 a share, a nickel better than analysts' estimates, on revenue of $11.78 billion, just above the $11.73 billion consensus. For the full year, Delta lowered its guidance, as it now expects to earn between $5.35 and $5.70 a share, compared with the $5.69 consensus.
Papa John's (PZZA) is up 4% to $50.28 on news that its founder will resign as chairman.
Weatherford International (WFT) is u 3.1% to $3.60 on news it sold its drilling rig business to Kuwait, Saudi Arabia, and Algeria for $278.5 million. - Teresa Rivas
Upgrades & Downgrades
Emerson Electric (EMR) is up 0.9% to $$69.70 after Deutsche Bank resumed coverage of the stock and upgraded it to Hold.
General Electric (GE) is up 1% to $14.13 after Deutsche Bank resumed coverage of the stock and upgraded it to Buy.
Johnson & Johnson (JNJ) is up 0.9% to $127.41 after Goldman Sachs upgraded it to Neutral.
NetApp (NTAP) is up 1.8% to $81 after Guggenheim initiated coverage with a Buy rating.
Perrigo (PRGO) is down 2.4% to $75.82 after Goldman Sachs downgraded it to Sell. - T.R.
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