Solid Month Ends with New Round of Trade Fears

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Trade war concerns resurfaced on Thursday...but this time it had nothing to do with China. The Trump administration announced that it would be imposing tariffs on steel and aluminum for U.S. allies Canada, Mexico and the EU. The responses from those countries were swift and stern.

The response from the market, though, was not as severe as might be expected. The major indices were definitely down on Thursday, but it wasn't the frightened plunge that we've become accustomed to on this issue. It looks like the market was expecting something like this sooner or later.

The Dow dipped by 1.02% (or about 250 points) to 24,415.8, while the S&P was off 0.69% to 2705.3. The NASDAQ was only down by 0.27% to 7442.1. The Russell 2000, which hit another new record just yesterday, slipped 0.87% to 1633.6.

"But just like Italy I'm hoping markets calm on this news," said Jeremy in Counterstrike . "In my opinion, this is Trump playing hardball to get a deal from everyone in the world on trade. The market is getting used to this notion, otherwise we would have been down a lot more."

Despite this rough ending, the major indices still produced a second straight month with gains. The NASDAQ jumped by about 5.3% in May, while the S&P increased 2.2% and the Dow rose about 1%. These performances marked a dramatic improvement over April, which was the first positive month since January but only saw gains of less than 0.5% for each of the indices.

Now we head into Friday with the NASDAQ up a bit for the week, but the Dow and S&P both down. The big news tomorrow is likely to be the employment situation report (unless there's more news on trade or some other headline). The last reading was considered a "goldilocks" report, as it was strong enough for the employment rate to dip below 4% but not enough to accelerate the Fed's rate hike plans.

Today's Portfolio Highlights:

Healthcare Innovators: A few downgrades from big brokerage firms had Kevin looking a bit askew at large-cap pharma company AbbVie (ABBV), which was one of this portfolio's earliest buys back in April 2017. The editor took a day to think about it and eventually came to the decision that the safest move was to take profits. Therefore, he sold ABBV on Thursday for a return of more than 51%.

Surprise Trader: It may not be earnings season, but there are still companies set to report. Case in point, industrial distribution company HD Supply (HDS) announces before the bell next Tuesday. The company is coming off back-to-back 5-cent earnings surprises, and Dave thinks the streak can continue next week. The editor sees an opportunity here and so he bought a 12.5% allocation in the name today. Read more in the full write-up.

Technology Innovators: Nanometrics (NANO) is a chip stock that recently reported a strong beat-and-raise quarter, which included revenues that beat the consensus by $10 million. Brian Bolan thinks the next quarter looks even better with guidance on the top and bottom lines that are already ahead of expectations. The editor decided that NANO would make a good addition to the portfolio. Read his complete commentary for a lot more on this new pick.

Momentum Trader: Shares of Attunity (ATTU) jumped more than 11% yesterday, and Dave wants to take advantage of that surge. This cloud-based software company has only been in the portfolio for a little more than two weeks; the editor added it on May 15th after a strong quarter that included a positive surprise of 240%. Half of the position was sold on Thursday for a 12.3% return. Dave also halved the DMC Global (BOOM) holding for a 3.7% profit.

Options Trader:"A solid Employment Situation Report tomorrow could be just what the market needs to kick it over the hump. The consensus is looking for 190,000 new jobs to have been created last month (184,000 from the private sector and 6,000 from the public) with the unemployment rate holding steady at 3.9%.

"Still, news that the US will impose steel tariffs on Canada, Mexico and the EU weighed on stocks. And they responded by saying they will issue new tariffs of their own on the US. Just like a trade war was averted with China (I never thought we'd see one anyway), I don't think we'll see one here. But it did throw a new worry into the market just when people thought we could move on from this.

"Either way, I don't see this as derailing the market in any way at this stage. And ultimately it should help forge new deals. There could be a few more bumps along the road before we get there. But I see this as being transitory and it should not impede the market's overall bullish advance." -- Kevin Matras

Until Tomorrow,

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.

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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