Stocks opened to solid gains Friday as a rally in China fueled optimism ahead of what promises to be a day of high-volume action.
China stocks were early influencers, as New Oriental Education (EDU), Huazhu Group (HTHT) and Autohome (ATHM) jumped more than 3% higher. Chip stocks lagged, with Micron Technology (MU) diving after delivering quarterly results late Thursday. Office furniture brand Steelcase (SCS) surged following its second-quarter results. Mazor Robotics (MZOR) spiked on a takeover bid from Medtronic (MDT).
The S&P 500 grabbed an early 0.3% gain as Acuity Brands (AYI) surged to lead the index following an analyst upgrade. The Dow Jones industrial average and Nasdaq Compoiste borth opened 0.2 %higher, then strengthened to 0.3% gains. McDonald‘s (MCD) led the Dow. American Airlines (AAL) jumped to the top of the Nasdaq 100. (For updates on this story and other market coverage, visit the Stock Market Today.)
Extensive rebalancing among the Standard & Poor’s indexes and industry designations promises to trigger heavy volume trading on Friday, amplified by the expirations of stock options and futures, as well as market index futures and options typically known as a “quadruple witching” session. The S&P reclassifications will be the most far-reaching in 19 years.
McDonald’s powered up 2.1% after announcing late Thursday it boosted its quarterly dividend 15%, to 1.16 from 1.01. The company said its “Velocity Growth Plan” initiated in 2017 was so far effective, and raised its targeted cash returns to shareholders to $25 billion for the three years ended 2019, up from its prior target of $24 billion. McDonald’s shares have been struggling to take and hold support at their 10- and 40-week moving averages, within an eight-month consolidation.
Among China-based names, NetEase jumped 2%. Jefferies upgraded NetEase to buy, from hold, with a 270 price target. NetEase is up 7.8% for the week, attempting to start up the right side of an eight-month consolidation.
Israel-based Mazor Robotics vaulted 10% higher. The surgical robotics innovator agreed to be acquired by Ireland-based Medtronic in an all-cash deal valued at $1.64 billion. The companies expect to close the deal in the third quarter. Medtronic shares slipped 0.1% in opening trade. The stock is extended, taking out new highs after clearing a flat base in July.
Steelcase surged nearly 18% after reporting late Thursday its first combined revenue and earnings advance since June 2016. Earnings leapt 32%, revenue swung 13% higher, both above analyst expectations. The Grand Rapids, Mich.-based company also announced the $79 million acquisition of U.K.-based furniture maker Orangebox Group. The move hauled the stock above an 18.25 buy point in a 15-month saucer base. Shares remain in a buy range through 19.16.
Lighting products leader Acuity Brands (AYI) climbed 4.5% after an upgrade to outperform from market perform by Wells Fargo. The report also lifted the stock’s price target to 187, from 140. Shares are now up 54% from a May low, scaling the right side of a bottoming base with a 187.09 buy point.
A week of interesting moves in China began with a pledge from Premier Li Keqiang on Wednesday that the country would not devalue its yuan for trade war purposes. That was followed by a comment that the country was set to reduce tariffs. Bloomberg elaborated on Thursday, reporting that China was set to lower import duties across a broad range of its trading partners. The cuts could go into effect as early as October, the report said. That helped boost market optimism in Europe and the U.S. on Thursday.
China’s markets rallied vigorously Friday, in their first session following reports of possible tariff cuts. The Shanghai Composite sprung 2.5% higher, ending up 4.3% for the week — the mainland benchmark’s best week since March 2016. Hong Kong’s Hang Seng Index popped 1.7%, sending it to a 2.4% gain and adding a second week to its rebound out of bear market territory. The Shanghai Composite remains down more than 20% from its January high, retaining its bear market status.
In Japan, Tokyo’s Nikkei 225 plowed 0.8% higher, ending the week with a 3.4% advance. Markets in Tokyo and Shanghai will be closed on Monday for a holiday.
Markets in Europe rallied in afternoon trade, despite British Prime Minister Theresa May saying Brexit negotiations were at a stalemate after the European Union categorically rejected her administrations trade proposals with no explanation. The FTSE 100 in London accelerated its gain to 1.5%, the CAC-40 in Paris jumped 0.8% and Frankfurt’s DAX held a 0.6% advance.
Oil prices rallied for a fourth session, with West Texas Intermediate up 1% to $71.05 a barrel and up nearly 3% for the week. The Organization of Petroleum Exporting Countries and a group of non-members led by Russia are scheduled to meet in Algeria to discuss production quotas this weekend. Baker Hughes (BHGE) releases its weekly rig count report at 1 p.m. ET.
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