The US-China trade tension has lingered so long that markets have developed resistance to its potential impact. With every new episode of sanctions by the two countries, the resilience of major stock market indexes is firming.
Once again, the market in general seems to have reacted positively to the encouraging economic data. And, S&P 500 and the Dow Jones Industrial Average owe this week’s rally mainly to their large-cap components. Both the indexes reached record highs before ending the last trading session.
Investors might be taking a cue from the robust labor market, with the unemployment rate falling to historically low levels and jobless claims settling at the lowest level in nearly 50 years. That, combined with the brightening economic momentum and improving fundamentals, has pumped a fresh vigor into the blue chips. And, the uptrend in market value is going to stay in the foreseeable future.
S&P 500 and the Dow Jones Industrial Average owe this week’s rally mainly to their large-cap components
In the recent weeks, the benchmark indexes were also buoyed by the exceptionally stable housing market and industrial output. The latest statistics show that those factors helped the financial markets in overcoming the pessimism attached to the gloomy trade scenario. Moreover, we are at the fag end of an earnings season that witnessed some outstanding performance by corporates.
However, it will be unwise to take things for granted, considering the long-term effect of the trade disruptions on the larger economy and markets across the world. With such a threat persisting, the current rally of the US indexes could be short-lived.
After ending the last session at a record high of $2,939.85, the S&P 500 index slipped slightly when markets opened Friday. Dow scaled to a new high of 26,656.98 this week, edging above the previous high seen at the beginning of the year.
Among this week’s gainers was Under Armour (UA), which rose about 7% after reporting strong quarterly results and issuing bullish guidance. Though Micron (MU) moved up about 4% following its above-consensus fourth-quarter results, the stock pared the gains later reacting to CFO David Zinsner’s comments on how the tariffs on Chinese imports will affect the company in the coming quarters.
Meanwhile, cannabis company Tilray (TLRY) was among the main losers this week, falling 28%. Red Hat (RHT) plunged nearly 7% amidst dismal revenue growth for the second quarter and weak guidance.