Plus, China wants to prevent further escalation in the trade war, Apple is announcing its new iPhones on September 10, and Best Buy reported earnings.
Stocks jumped on Thursday, with the Dow up 300 points, or 1.2%, on the open. The S&P 500 traded 1.2% higher, while the Nasdaq gained 1.4%.
“Positive news on trade has investors looking to move back into some of the equity markets and maybe a little more risk on,” Chris Gaffney, president of world markets at TIAA, told Bloomberg. “The GDP number, while there was a slight pullback in second-quarter estimates, consumers still are looking strong. That’s the key. The earnings component was very good – corporate profits are looking robust.”
Stocks rose after China indicated it wouldn’t immediately retaliate against the latest American tariff increase announced by President Donald Trump last week. “China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation,” Commerce Ministry spokesman Gao Feng told reporters Thursday. The new tariffs on Chinese exports to the U.S. are due to go into effect on September 1 and again in December, and some retaliatory measures from Beijing are already planned. “Escalation of the trade war won’t benefit China, nor the U.S., nor the world,” Gao said. “The most important thing is to create the necessary conditions for continuing negotiations.” Trump told Fox News Radio this morning that the two countries are set to have trade talks today “at a different level” without elaborating on what that “different level” is, while a White House official told CNBC that “both sides remain in communication at various levels.” “China’s been ripping off the United States,” Trump said to Fox News. “I think they want to make a deal, I sort of think they have to make a deal, and we’ll see what happens.” Meanwhile, Trump’s trade advisor Peter Navarro said negotiators from China are expected to come to Washington in September as planned to talk about the big changes the U.S. is asking for, but said it’s “unlikely anything quick will happen.”
The U.S. economy slowed a bit more than initially thought in the second quarter as the strong growth in consumer spending was offset by declining exports and a smaller inventory build. The Commerce Department said gross domestic product increased at a 2.0% annualized rate in its second reading of Q2 GDP Thursday morning. That was revised down from the 2.1% pace estimated last month. The economy grew at a 3.1% rate in the first quarter, and thus expanded 2.6% for the first half of 2019. Consumer spending, which makes up about two-thirds of the economy, grew 4.7%, topping forecasts with the biggest gain since 2014. The report hints that Trump’s 3% annual growth goal may be even more out of reach as the U.S. economy faces complications from the trade war with China.
Treasury Secretary Steven Mnuchin said ultra-long U.S. bonds are “under very serious consideration” in the Trump administration, according to Bloomberg. “If the conditions are right, then I would anticipate we’ll take advantage of long-term borrowing and execute on that,” Mnuchin told Bloomberg yesterday, citing a meeting of officials earlier that day to review the possibility. The idea of 50- or 100-year bonds has gained popularity in the Treasury recently, but was considered as early as 2009. Issuing extremely long-term debt would limit the cost on taxpayers to stymie the almost $1 trillion annual budget deficit and could mean a few extra points of returns for pension funds even as yields fall. “It would be premature for me to comment on what our conclusion is,” Mnuchin said, adding that the department is “actively revisiting it, and it is something that is under very serious consideration.”
Apple just sent out invitations to the media for its annual event to take place on September 10, where it is expected the company will announce new iPhone models. According to several leaks, Apple is expected to announce three new iPhones, including a successor to the cheaper iPhone XR and two “pro” models that are expected to serve as upgrades to the iPhone XS and iPhone XS Max. Apple also said Thursday morning the it is reversing its stance on iPhone repairs, and will start offering independent repair shops parts, tools, and guides to help fix broken iPhones. The company is also expected to use the event to talk more about its upcoming services launching later this year, including Apple Arcade—which will give subscribers unlimited access to select games for a monthly fee—and Apple TV+, the company’s new subscription streaming service. In other Apple news, the company said that it is “eager” to open its first retail outpost in India after years of struggling to gain market share in the country, according to CNBC. This comes after it was reported that Indian officials are discussing a list of “target companies,” including Apple, Foxconn, and Wistron, that it will woo in order to encourage these companies to shift business out of China in a bid do capitalize on the U.S.-China trade war.
In earnings news, Best Buy reported quarterly profit of $1.08 per share, beating estimates by $0.09, before the bell on Thursday. The electronics retailer also raised its full-year earnings forecast, but revenue and comparable store sales fell below estimates for the quarter, sending the stock reeling. Best Buy shares are currently down just under -9%. Shares of discount retailers Dollar General and Dollar Tree soared in early trading this morning after both companies topped analyst estimates for revenue and delivered positive forecasts despite trade war concerns. As of this writing, Dollar General is up 9.68% and Dollar Tree was up as much as 4.66% before falling slightly. And Abercrombie & Fitch shares are down -14.58% after the apparel retailer reported a loss of -$0.48 per share in its latest quarter, with net sales down to $841.1 million from $842.4 million. Abercrombie also said that President Trump’s new tariffs on clothing and footwear exports from China will have a “direct adverse impact” on the cost of merchandise and gross profit of about $6 million for the fall season.
Stocks We’re Watching
DGSE Companies (OTC: DGSE): DGSE is up 19.74% over the last week after it was reported that the company had secured a parts account with The Swatch Group, the Swiss luxury watches manufacturer. With the new account, DGSE will expand the scope of its services to include Swatch Group timepieces, including their Omega, Longines, Rado, Tissot, Mido, and Hamilton brands, and watches with Swiss ETA movements, using 100% genuine factory parts. “We have a passion for extraordinary watches from the world’s best watchmakers, and we offer a team of highly trained craftsmen to maintain and repair them,” said Robert Burnside, who leads the company’s timepiece business. “Our new parts account with Swatch expands the brands we service even further by giving us the knowledge to rigorously test these timepieces and the parts to ensure the quality and reliability.”
Syneos Health (NASDAQ: SYNH): Shares of this biopharmaceutical stock are 34.21% year-to-date, and were up as much as 4.8% yesterday after the company said the Securities and Exchange Commission had not recommended any enforcement action following a recent investigation of the company. Syneos said in a regulatory filing that it had been notified by the SEC in February that the agency had entered into an investigation into “the company’s revenue accounting policies, internal controls and related matters.” But “on August 26, 2019, the SEC Staff notified the Company’s outside counsel that it has concluded its investigation and, based on the information provided to the Commission as of such date, does not intend to recommend an enforcement action,” the filing said.