Categories
Dow futures surge more than 250 points after Trump and Xi agree not to impose more tariffs – CNBC
Reversing the Huawei ban could boost chipmaker shares like Skyworks Solutions, Qorvo and Micron Technology, all of which have revenue exposure to Huawei. Skyworks and Micron were both down at least 10% for 2019 through Friday’s close. Qorvo was down 16.9% year to date.
Investors anxiously awaited the meeting between Trump and Xi as they looked for clues on whether the world’s largest economies would resume trade negotiations or if the conflict would be prolonged.
Chetan Ahya, global head of economics at Morgan Stanley, described the meeting’s outcome as “an uncertain pause.”
There is “no immediate escalation, but still no clear path towards a comprehensive deal,” Ahya said in a note Sunday. “As things stand, we lack clarity on whether real progress was achieved on the sticking points that caused talks to break down in the first place. Hence, our overarching conclusion is that the developments over the weekend on their own don’t do enough to remove the uncertainty created by trade tensions.”
Comments from Larry Kudlow, director of the National Economic Council, added to the uncertainty around U.S.-China trade relations. Kudlow told Fox News on Sunday that Trump was not granting Huawei “general amnesty. ” He also said there is no timetable for when a deal might be finalized.
The lingering uncertainty around U.S.-China trade relations will continue to dampen the outlook on corporate earnings, said Larry McDonald, editor of The Bear Traps Report.
“There’s a substantial decay factor developing inside the S&P 500’s earnings picture,” McDonald said. “CFO’s cannot make decisions with a purgatory of uncertainty, endlessly … hanging over the market. The equity rally is a screaming sell.”
Calendar second-quarter earnings for the S&P 500 are expected to fall on a year-over-year basis, according to FactSet data. Analysts also lowered their third-quarter earnings forecast to show a contraction from the previous year, as profit expectations for multinationals with exposure to China have soured.
China and the U.S. have been embroiled in a trade war for more than a year. In that time, the U.S. has slapped tariffs on more than $250 billion worth of Chinese imports. China has retaliated with levies of its own on U.S. products.
In economic news, ISM manufacturing and construction spending data are expected at 10 a.m. ET.
—CNBC’s Michael Bloom and Everett Rosenfeld contributed to this report.