Stocks and Securities
Stocks fell on Friday following conflicting US China trade reports and softer-than-expected sales guidance from Apple (AAPL 207.48, -14.74, -6.6%). Futures rallied overnight on a Bloomberg report indicating U.S. President Trump asked his cabinet to draft a trade deal, but stocks eventually fell into negative territory after White House officials denied the report.
The S&P 500 lost 0.6%, the Dow Jones Industrial Average lost 0.4%, and the Nasdaq Composite lost 1.0%. Small caps outperformed, with the Russell 2000 adding 0.2%. All four major indices closed solidly higher for the week, adding between 2.4% and 4.3% apiece.
Director of the United States National Economic Council Larry Kudlow confirmed in a CNBC interview that the cabinet was not asked by President Trump to draw up a trade plan for China. Later, as stocks traded at session lows, President Trump reiterated his belief to reporters that the U.S. will reach a trade deal with China. This led stocks to cut their losses in late afternoon trading.
In earnings, Apple raised some red flags after forecasting weaker-than-expected sales for the holiday quarter and announcing it will no longer provide unit-sales data for the iPhone, iPad, and Mac moving forward. The company did beat both top and bottom line estimates though.
On the other hand, energy Dow components Exxon Mobil (XOM 81.95, +1.28, +1.6%) and Chevron (CVX 114.73, +3.56, +3.2%) rose after both reported above-consensus earnings. The energy sector showed relative strength, but still lost 0.1%. On a related note, WTI crude extended its recent downward trend, losing 0.9% to $63.20/bbl and reaching its lowest level since April.
Highlighting Friday’s batch of economic data was the influential Employment Situation report for October, which showed a nonfarm payrolls increase of 250,000, higher than the Briefing.com consensus of 190,000. Also, as expected, average hourly earnings increased 0.2%, and the unemployment rate remained at 3.7%.
In short, the strong jobs report validated labor market trends that will keep the Federal Reserve on a tightening path. The CME FedWatch Tool indicated a 80.7% chance of another Fed rate hike in December, up from a 74.5% chance the previous day. The Fed will meet next week, but no rate hike is expected.
Treasuries sold-off with equities on Friday, pushing yields notably higher across the curve. The Fed-sensitive 2-yr yield and benchmark 10-yr yield spiked seven basis points each to 2.91% and 3.21%, respectively, compared to 2.81% and 3.08% yields last week. Also, the U.S. Dollar Index added 0.2% to 96.48.
Where do we look for opportunities today?
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Further stocks research
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Lastly, take time to read our latest piece “What are the best Cannabis Stocks to have in 2018?”.
Our ETF ALPHA | list of 16 ETFs for this week can be found here.