Stock futures came off their lows heading into Friday’s open, as investors awaited China’s response following an increase in the U.S.-imposed trade war tariffs. Earnings results drove mixed early action, and the market’s most recent heavyweight IPO, Uber Technologies (UBER) was set to launch during Friday’s session.
Dow Jones futures trimmed lasses sharply, trading 0.3% below fair value just before the open. S&P 500 futures were down 0.4%. Nasdaq 100 futures halved their early loss to 0.3%.
Zillow Group (Z), Cargurus (CARG) and Dropbox (DBX) all posted strong gains on earnings news. IPO Guardiant Health (GH) spiked on its Q1 report. Fibrogen (FGEN), Symantec (SYMC) and Yelp (YELP) were among those that fell hard after their reports.
China stocks were split, with JD.com (JD) up more than 7%, and 51Job (JOBS) down 10% after reporting first-quarter results. Wynn Resorts (WYNN), which has high China exposure through its Macau properties, dropped 5% following a mixed first-quarter report.
Dow Jones Stocks: UnitedHealth Leads, Apple Lags
China-trade sensitive names Apple (AAPL) and Caterpillar (CAT) traded lowest among Dow Jones stocks, down more than 1% each. Apple has been testing support at its converged 10- and 40-week moving averages, holding just above a 197.79 buy point in a cup-with-handle base. Friday’s premarket action implied Apple stock would open below its buy point, but still above its 10- and 40-week lines. Premarket moves do not always accurately predict how a stock behaves after the opening bell.
At the top of the Dow Jones list, UnitedHealth Group (UNH) narrowed its early gain to 0.4%,
Booking Holdings (BKNG) led both the Nasdaq 100 and S&P 500, up more than 3%, despite reporting a broad revenue and earnings miss late Thursday. Symantec took the hardest early hit on both indexes, down almost 15%.
China Trade War Tariffs Increase
The U.S. launched its tariff increase against China just after midnight eastern time. It raises tariffs to 25% from 10% on China-made imports valued at $200 billion per year. A statement from China’s Ministry of Commerce said the move left the country with “no choice but to take the necessary countermeasures.” It also said, “We hope to solve the existing problems through cooperation and negotiations with mutual efforts from both sides.”
President Trump weighed in via social media early Friday, tweeting there was “absolutely no need to rush” on a trade agreement with China.
Trade talks between top U.S. and Chinese negotiators ran late into the night Thursday, and were set to resume Friday morning. President Donald Trump has said he is contemplating 25% tariffs on an additional $325 billion worth of imports if the talks fail to produce an agreement.
Dow Jones: Worst Week Since December
The Dow Jones industrials head into Friday’s session down 2.6% for the week through Thursday. The Nasdaq is down 3.1%. The S&P 500 shows a 2.5% loss. All three indexes were looking at their worst week since December. The Dow cut below its 50-day moving average and was leaning toward a test of its 200-day line. Both the Nasdaq and the S&P 500 were wrestling to maintain support at their 50-day levels.
The danger in breaking below technical markers such as the 50-day line is that those watermarks can turn from support to resistance. A weekly chart shows how the 50-day resistance acted as a ceiling for the market’s progress, from October through December.
The market has four monthly advances under its belt so far this year. A down month — particularly in May, given the “Sell In May” adage — would not be startling. However, recent losses have been primarily linked to China trade war worries. A deal on that front could easily reverse the market’s losses.
For more detailed analysis of the current stock market and the status of its uptrend, study the Big Picture.
IPO Watch: Uber Set To Launch, Guardiant Spikes
Recent IPOs were mixed in early trade. Trade Desk (TTD) and Propetro Holding (PUMP) scored early gains. Jumia Technologies (JMIA), already down 30% for the week through Thursday, dropped more than 11% early Friday. Seven-week-old Lyft (LYFT) trimmed its early losses to 0.3%.
Guardiant Health looked like the early big winner among IPOs, up 16% in premarket action. The cancer diagnostics and genetics specialist reported revenue up 121% and a loss of 30 cents-per-share, both better than consensus targets. Full-year revenue guidance of $15 million or more was far above expectations for $135.67 million. SVB Leerink raised the stock’s price target to 95, from 83, on Friday. Shares ended Thursday 40% below their mid-March high, and up 237% from their October IPO price.
Uber is set to start trading Friday. The company’s 180 million shares priced on Thursday at 45, which would raise about $8.1 billion. Research and advisory firm IPO Boutique on Thursday said, based on underwriter guidance, that the offering was “multiple-times oversubscribed.” The Lyft IPO in March raised about $2.34 billion.
Stocks just coming public tend to be volatile and unpredictable. Sound investing strategy calls for waiting for the stock to form an IPO base and a valid entry point.
Europe Gets U.K. GDP Boost, China Stocks Rally
China’s markets surged in a late rally Friday, leaving the Shanghai Composite up 3.1% and Hong Kong’s Hang Seng Index with a 0.8% gain. The Shanghai benchmark ended the week with a 4.5% loss. The Hang Seng dropped 5.1%. It was the worst week for both indexes since the start of the trade war in January-February 2018.
“Elevated noise constitutes a negotiating tactic on both sides, and that there will be some sort of a resolution,” said Howard Wang, head of Greater China equities at JPMorgan Asset Management in Hong Kong, quoted in Friday’s South China Morning Post. “No one will benefit from a trade war. In the meantime Chinese and other policymakers around Asia are likely to be more rather than less accommodative.”
Markets in Europe trended higher in early afternoon trade. The U.K. released first-quarter GDP data showing ts strongest growth since 2017, although the numbers were likely skewed by pre-Brexit stockpiling. Frankfurt’s DAX led, up 0.6%. The CAC-40 in Paris climbed 0.4%, while London’s FTSE 100 added 0.2%.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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