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Stock Futures Fall as Trade Worries Resurface


Friday, August 9, 2019

U.S. stock futures declined ahead of trading on Friday ahead of a likely volatile session marked by rising trade tensions. Per overnight reports, the United States is delaying decisions on granting licenses to U.S. companies which will allow them to recommence business relationships with Huawei. This is likely a retaliatory step after China announced it was ceasing purchase of American agricultural products.

Meanwhile, the British economy contracted unexpectedly for the first time since late 2012. Fresh official figures revealed that the country’s GDP dipped 0.2% in the second quarter. Political tensions heightened in Europe after one of Italy’s deputy prime ministers called for snap polls. Additionally, the IEA reduced its global oil demand growth projections for this year and the next citing slowdown fears.

According to fresh data from the Labor Department, U.S. producer prices advanced only moderately last month. The increase was largely attributable to a rebound in energy prices. However, core producer inflation receded in July, which will likely lead the Fed to cut rates again next month.

Markets closed higher on Thursday as investors received better-than-expected trade data from China and the country’s efforts to arrest the yuan’s plunge against the U.S. dollar. The three major benchmarks ended in the green and posted their best close in over two months.

The Dow Jones Industrial Average increased 1.4%, to close at 26,378.19. The S&P 500 increased 1.9% to close at 2,938.72. The tech-laden Nasdaq Composite Index closed at 8,039.16, gaining 2.2%. The fear-gauge CBOE Volatility Index (VIX) decreased 6% to close at 18.33. Advancers outnumbered decliners on the NYSE by a 4.32-to-1 ratio. On Nasdaq, a 3.52-to-1 ratio favored advancing issues.

The Dow amassed 371.1 points to close in the green. Shares of Apple AAPL lost 2.2% and supported gains for the 30-stock index. The stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The S&P 500 rose 54.1 points to end in positive territory. All of the 11 major sectors of the S&P 500 ended in the green, with technology stocks leading the advancers. The Technology Select Sector SPDR Fund (XLK) increased 2.5% on Thursday.

Meanwhile, the Nasdaq gained 176.3 points to also close in the green. Shares of Facebook FB jumped 2.7% and supported gains for the Nasdaq. Further, Thursday’s gains helped the indexes turn positive for the week. Also, the three major indexes exhibited their best performance since Jun 4.

After a prolonged trade war, tensions between the United States and China seem to be developing into a currency war. Notably, China pegged its onshore reference rate for the yuan at 7.0039 per US dollar on Thursday. This is the yuan’s weakest level against the dollar since Apr 21, 2008.

However, market watchers rejoiced after the reference rate was higher than feared initially. The People’s Bank of China (PBOC) fixes the currency on a daily basis, allowing only a 2-percentage-point change on either end of the currency’s official midpoint.

Meanwhile, China’s exports rose 3.3% year-over-year in July, against expectations of a 1% decline in the period.

On the economic data front, initial jobless claims fell to near post 2008 lows the last week, coming in at 209,000.

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