Plus, Chinese negotiators are maintaining “effective communication,” Hurricane Dorian is bearing down on Florida, Campbell Soup is gaining, and Ulta Beauty is crashing.
Stocks opened higher Friday with the Dow trading 150 points higher, or 0.6%. The S&P 500 was up 0.5% on the open, while the Nasdaq gained 0.3%. But the rally didn’t last long and gains were erased early in the trading day, knocking the Dow down -0.04%, the S&P down -0.15%, and the Nasdaq down -0.5%, as of this writing.
“For U.S.-China trade to cause a sustainable rally, we need some proof of actual movement towards a trade ‘truce,’” Tom Essaye, founder of The Stevens Report, wrote in a note. “While rhetoric has improved, that did not happen.”
China’s Foreign Ministry said early Friday that the U.S. and Chinese negotiators are maintaining “effective communication” as the two countries attempt to strike a deal on the trade front, according to a report from Reuters. This report follows comments from the Chinese Ministry on Commerce on Thursday that suggested that China won’t escalate the trade war for now in hopes of coming to an agreement to end the trade dispute. Meanwhile, the U.S. Chamber of Commerce urged Trump and Xi to withdraw tariffs scheduled to kick in on Sunday, and return to negotiations in good faith. According to the lobby group’s head, the escalating trade war risks a recession.
In other trade-related news, Trump took to Twitter Friday morning to argue that “badly run and weak companies” have used his trade war with China as a scapegoat for flagging business in order to mask “bad management.” His tweets come as businesses from more than 160 industry groups criticized Trump’s latest move to add duties on $300 billion worth of Chinese products. Trump again tried to pin the blame on the Federal Reserve rather than his trade war with China for the difficulties these companies are experiencing. “If the Fed would cut, we would have one of the biggest Stock Market increases in a long time,” Trump tweeted. “Badly run and weak companies are smartly blaming these small Tariffs instead of themselves for bad management…and who can really blame them for doing that? Excuses! … We don’t have a tariff problem (we are reigning in bad and/or unfair players), we have a Fed problem. They don’t have a clue!”
U.S. consumer sentiment fell the most in six years as Americans expressed concern about how Trump’s tariffs are impacting the economy and the risks of a potential economic downturn. The University of Michigan’s final sentiment index fell to 89.8 in August, according to data released Friday. This data comes on the heels of somewhat mixed consumer sentiment readings this month. The Conference Board’s confidence measure eased in August but also posted the best assessment of current conditions since 2000. While Bloomberg’s comfort gauge gained for a second week, but the monthly expectations gauge sank to a five-month low as more Americans say the economy is getting worse. And then another report from Friday showed that U.S. personal spending accelerated more than expected in July, indicating household consumption remained on solid footing at the start of the third quarter. According to the University of Michigan’s report, buying attitudes toward appliances, home electronics, and other household durable goods have fallen to a five-year low on tariff concerns, while attitudes toward buying cars are their dimmest since 2013. “The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one in three consumers,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “Trump’s tariff policies have been subject to repeated reversals amid threats of higher future tariffs. Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home. … While the overall level of sentiment is still consistent with modest gains in consumption, the data nonetheless increased the likelihood that consumers could be pushed off the “tariff cliff’ in the months ahead.”
Hurricane Dorian is threatening Labor Day weekend plans as it gains strength and moves closer to Florida’s coast. The storm is expected to make landfall on Monday or Tuesday near Jupiter, Florida, as a Category 4 storm with winds expected to reach 140 miles per hour. Florida’s governor has expanded a state of emergency to 67 counties from 26, and President Trump cancelled a planned trip to Poland this weekend due to the storm. “You are talking about significant damage and total destruction of some structures at or near the coast, “ AccuWeather meteorologist Dan Pydynowski. “You are talking about heavy flooding rainfall across the interior of Florida and you are talking about sustained tropical-storm-force winds all up and down the Florida peninsula.” Airlines are considering whether to cancel flights to the state during the busy Labor Day weekend, while orange juice futures are surging on estimates that roughly 60% of the state’s main producing region could be impacted by the storm.
In earnings news, Campbell Soup is up 8.36% Friday morning after the company reported adjusted quarterly profit of $0.49 per share, beating estimates by $0.08, with organic sales up 2%. However, Campbell also reported a net loss attributable to its shareholders of $8 million, or $0.03 per share, compared to a profit of $94 million, or $0.31 per share. Ulta Beauty is down nearly -30% after the retailer posted a rare earnings miss, slashed profit forecasts and net sales targets for the year amid the weakness in the U.S. cosmetics category. Piper Jaffray analyst Erinn Murphy wrote in a note, “To be clear, the second quarter was not our concern but rather what is implied for the company’s second-half trends, which could bleed into the first half of next year.” While Dell shares were up as much as 13.7% after the computer maker reported adjusted quarterly profit of $2.15 per share, beating analysts’ expectations of $1.47. Dell also delivered a revenue beat on strong sales across its computer product line and said that it is successfully mitigating the impact of tariffs imposed by the U.S. and China.
Stocks We’re Watching
Collectors Universe (NASDAQ: CLCT): Shares in this collectibles authentication and grading services provider are up more than 120% so far this year, and are up more than 8% in the last week after the company reported fiscal fourth-quarter net income of $2.8 million, on revenue of $19.8 million. For the year, Collectors Universe reported profit of $10 million, or $1.11 per share, with revenue of $72.5 million. Operating income in fiscal 2019 increased by $5.4 million to an annual record of $14.3 million, up from $9 million last year, representing a gain in operating margin of 20%.
Burlington Stores (NYSE: BURL): Shares of this discount retailer are up 26% so far this year and nearly 16% in the last week after the business crushed earnings for its most recent quarter. Burlington reported quarterly earnings of $1.36 per share, beating the consensus estimate of $1.15 per share, representing an earnings surprise of 18.26%. The company said it had net income of $85 million, or $1.26 per share, in the quarter up from $70.9 million, or $1.03, in the same period last year. Sales rose to $1.662 billion from $1.505 billion, beating forecasts of $1.631 billion, as same-store sales rose 3.8%. Burlington expects fiscal 2019 sales growth of 8.8% to 9.3%, assuming same-store sales rise 2.0% to 2.5%. It anticipates adjusted EPS to range from $7.14 to $7.22, compared with consensus estimates of $6.99.