Fewer Tariffs Bring Higher Stocks

An encouraging trade headline on Thursday led to a sharp rally that lifted two of the major indices to another round of new highs.

The U.S. and China have apparently agreed to remove existing tariffs in phases as the deal progresses.

Needless to say, the market loves the idea. If it actually happens, it would mark some real progress instead of the usual window dressing that we’ve seen throughout this trade conflict.

That a humongous “IF” though!

In fact, this headline was only a few hours old before a new one came over the wire about strife in the administration over this plan.

As a result, the major indices did give back some of the morning’s rally, but stocks still managed to make more history.

The Dow rose 0.66% (or about 182 points) to a new record of 27,674.80, though it had been up by more than 250 points at its best.

The NASDAQ rose 0.28% (or nearly 24 points) to 8434.52, which is less than a point from its record. The S&P, however, advanced 0.27% for a new high of 3085.18.

So here we go into another Friday with all of the major indices solidly higher for the week.

The NASDAQ will be going for a 6th straight positive week, while the S&P and Dow will be going for 5 weeks and 3 weeks, respectively.

One of the things that Friday already has going for it is a strong quarterly report from Disney. The entertainment powerhouse beat on both the top and bottom lines… and is less than a week away from entering the suddenly-crowded world of streaming with Disney+.

Shares are up approximately 5.3% afterhours as of this writing.

So mark down another positive report in a very respectable earnings season, which has been a big relief to skittish investors. As long as we don’t get any negative headlines tomorrow, we should have a positive end to this strong week.

Today's Portfolio Highlights:

Technology Innovators: If we finally get a trade deal in the near future, then the chipmakers will be among the biggest beneficiaries. Brian went to the supply side of the equation to take advantage by picking up Ultra Clean (UCTT), which is enjoying a post-earnings drift higher after a big beat and raise quarter last week. The stock has topped the Zacks Consensus Estimate in three of the last four quarters and amassed an average surprise of 25% over that time. Rising earnings estimates for this year and next have made UCTT a Zacks Rank #1 (Strong Buy). The editor is expecting plenty more from this name moving forward. Read the full write-up for more.  

Home Run Investor: When you go to a football or basketball game, you want to see the big stars do big things. So it was great for this portfolio to watch its biggest winner Synaptics (SYNA) crush its quarterly report and soar by 15.9% on Thursday. This position was the best performing stock among all ZU services today. This maker of touch-screen technology just beat the Zacks Consensus Estimate for earnings by over 67% and for revenues by 8.6%. SYNA has now gained nearly 65% for the portfolio since being added less than four months ago.

Income Investor: "China said it had reached an agreement with the U.S. to remove all existing tariffs in stages. We should remember that cancelling these tariffs on Chinese imports has been an important condition that Beijing has demanded in order to reach an actual trade deal.

"The Dow and the S&P 500 closed at record highs as a result.

"This new development has increased investor hope that a trade deal of any sorts would be signed soon. But, any positive-seeming progress over the past few months has boosted investor confidence regarding trade. Staying cautiously optimistic about anything trade deal related is probably the best strategy going forward."
-- Maddy Johnson

All the Best,
Jim Giaquinto

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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