Stocks opened to tight losses Wednesday, as investors assessed fresh trade war chatter and early earnings news.
China announced a new round of trade tariffs Wednesday, responding to a U.S. escalation of tariffs on Tuesday. Earnings results showed Applied Optoelectronics (AAOI) poised to be the big early winner. 3D Systems (DDD) and Endo International (ENDP) also chalked up big premarket moves on earnings results. On the big-cap side, CVS Health (CVS), Albemarle (ALB) and Michael Kors (KORS) climbed on a positive second-quarter report. Walt Disney (DIS) slipped after reporting mixed results late Tuesday.
Losses were mild across the board, with the Dow Jones industrial average, the Nasdaq Composite and the S&P 500 all down less than 0.1%.
On the Dow, Disney dropped 0.6%, while Caterpillar (CAT) took a 0.8% dive. Albemarle, Michael Kors and CVS Health led the S&P 500. Drugmakers were under early selling pressure, with Mylan (MYL), Regeneron (REGN) and Amgen (AMGN) posting the largest declines among Nasdaq 100 stocks.
The Dow and S&P 500 are now midway through their sixth straight weekly advances — the longest run for each since last year’s September-to-November rally. The Nasdaq has climbed for six consecutive days since rebounding from support at its 50-day moving average. The index has not managed a seven-day run-up since March.
Trade War Chatter, Record Bond Auction
China’s markets ended on a mixed note Wednesday. The Shanghai Composite dropped 1.3%, while Hong Kong’s Hang Seng added 0.4%, as the Trump administration was set to launch the next round of China tariffs on Aug. 23. A statement from U.S. Trade Representative Robert Lighthizer said Tuesday the U.S. was preparing to launch 25% tariffs on 270 China-made products, totaling imports of $16 billion into the U.S. each year.
Chin’a Ministry of Commerce said Wednesday it would respond in kind to the increased U.S. tariffs. China will also implement 25% tariffs on U.S. made imports totaling $16 billion per year. The ministry said that targeted goods would include oil and automobiles.
The news helped send Europe’s markets back into mixed action in afternoon trade. London’s FTSE 100 maintained a 0.8% gain. Frankfurt’s DAX clung to a fractional advance, while the CAC-40 in Paris slipped 0.2%.
Bonds were steady, with the 10-year yield holding at 2.97% as the Treasury prepared to auction a record $26 billion in 10-year notes. The Treasury increased its debt sales by $26 billion in July, and is upping the ante to $30 billion in August. A decrease in bond prices could lift the yield to 3% during the auction, circumstances not seen since 2011.
CVS, Michael Kors Rise; 3D Systems Soars
Applied OptoElectronics rocketed 19%, and Endo International bolted 17% higher on earnings results. Endo shares finished Tuesday up 138% since April.
CVS Health swung more than 5% higher, as pharmacy volumes helped drive second-quarter sales and earnings above analyst expectations. Continued reimbursement price improvements also helped pharmacy results, the company said, while generic introductions pressured results. CVS shares are attempting to form a bottom in a deep, three-year consolidation.
Charlotte, N.C.-based Albemarle scaled up 6%. The world’s largest lithium producer broadly topped analyst targets for the second quarter. Lithium sales rose more than 30%, vs. a 16% gain in overall revenue. Management hoisted full-year earnings and revenue guidance past consensus views.
Fashion house Michael Kors stepped up 5.1%. The Hong Kong-based apparel maker posted a big fiscal first-quarter earnings beat, but its second-quarter earnings and revenue outlook was below analyst targets. Kors stock has held solid support at its 10- and 40-week moving averages, but has been unable to top resistance near 70, since February.
Printing leader 3D Systems churned out an 28% opening gain. The Rock Hill, S.C.-based company reported better-than-expected second quarter results and a precision machine-parts partnership. Shares as up 96% from a May low.
Netherlands-based Mylan crumbled 8% at the starting bell. The generic drugmaker reported second-quarter shortfalls on both its revenue and earnings lines. The loss pulled shares back below their 10-week moving average, to retest lows from July.
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