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After The Close - Stocks fell on Friday as discouraging news on international trade weighed on sentiment at the opening bell. Word that talks between the United States and China had broken down was not what investors wanted to hear. The hope in recent days had been that a long-awaited deal between the world’s two largest economies might yet be fashioned in the coming weeks. But the two sides instead have reached an impasse.

There is still some optimism that a workable agreement can be salvaged. President Trump and China’s President Xi Jinping are scheduled to meet in about a month at a Group of 20 summit in Japan. A sense of urgency may need to be injected into negotiations ahead of that meeting to increase the chances of success, though.

Separately, there was a plus on the trade front in that the Administration delayed tariffs on cars and auto-parts from Europe and Japan by 180 days to allow time for talks. The U.S. also agreed to drop tariffs on steel and aluminum products from Canada as part of an effort to get revisions to NAFTA through Congress.

Broadly, the fear has been that escalating trade wars will slow global commerce and reduce business investment, owing to uncertainty and higher costs. That would place more of the burden on the consumer segment to boost economic growth.

As for the consumer, there was a strong reading on sentiment in April from the University of Michigan. In fact, consumer sentiment rose to a 15-year high, driven by a tight labor market.

The Conference Board Leading Economic Index also rose for the third straight month and, combined with strong consumer sentiment and the pluses on trade issues, helped to push the market into positive territory by late morning. 

But stocks could not hold onto their gains heading into the weekend. At the close, the Dow Jones Industrial Average was nearly 100 points lower; the NASDAQ was down 82 points; and the S&P 500 gave back 17 points.

In other markets, the yield on the benchmark 10-year Treasury was little changed at around 2.40%. But that low of a level indicates a measure of caution on Wall Street. Six months ago, the yield was about 3.20%, suggesting investors were looking for faster economic growth and perhaps a bit more inflation.

For the week, the Dow Industrials fell, mostly owing to a sharp decline on Monday related to the implementation of higher tariffs on goods from China. - Robert Mitkowski

At the time of this writing, the author did not have positions in any of the companies mentioned.

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Before The Bell - Strong earnings from Cisco Systems (CSCOFree Cisco Systems Stock Report) and Walmart (WMTFree Walmart Stock Report) helped the stock market get rolling yesterday morning, with the Dow Jones Industrial Average barreling ahead by more than 200 points in the first hour of trading. The gains in these two Dow components more than offset ongoing worries about the trade war with China. Earlier this month, the assumption had been that some accord would be reached shortly. Now, that seems unlikely for some time, at least. As for other trade worries, they did ease a little on Wednesday after a report came out that the United States planned to delay auto tariffs by up to six months.

Meanwhile, in economic news, the U.S. Census Bureau reported that housing starts had increased in April from March, rising 5.7%, to 1.235,000 homes on an annualized basis. That was a somewhat larger increase than forecast. At the same time, building permits, a more forward-looking metric edged up by 0.6% last month, to 1,296,000 homes on an annual basis. Both performances were a positive divergence from the weaker numbers issued on Wednesday on retail sales and industrial production. This better showing on the residential construction front also helped the market.

In all, the Dow continued to rocket ahead, with the blue chip composite gaining nearly 250 points as we approached the 90-minute mark of the trading day. It seemed as though Monday's massive selloff was now pretty far into the rearview mirror. This is either a case of Wall Street looking past the tariff woes or being still optimistic that some meeting of the minds can yet be fashioned. Either way, the bulls were making some noise with gains coming in across the board, both for the large-cap S&P 500 and the NASDAQ, as well as for the S&P Mid-Cap 400 and the small-cap Russell 2000.

The rally then would pick up additional strength as we moved into the afternoon hours, with the Dow climbing to a gain north of 300 points. The NASDAQ tacked on 100 points late in the day, as the buyers flocked en masse into the market. For the past several days, it seems as though fears of a crumbling trade situation have given way to hopes that the overall strength in our economy will hold the bears at bay. This upbeat pattern then would continue into and through the final hour of trading to complete the third up day in succession this trading week.

All told, the Dow would finish nearly 100 points off of the day's high, ultimately gaining 215 points; the NASDAQ would add 76 points, after having been up by close to 125 points. Still, and all, it was a strong day with many more stock rising than falling on the Big Board. The market again seems slightly overbought, but with little news out today in the form of earnings or the economy there may not be all that many catalysts to drive stocks one way or the other. Thus, in that setting, trade developments could again play an outsized role in the day's action. Indeed, they again seem to be playing a key role early this morning.

As for the current day, we see that stocks were mostly lower in Asia overnight, with China getting hit particularly hard, while in Europe, the leading bourses are also trending downward at this hour on increasing trade concerns.  Also, oil prices, up again yesterday, are rising anew at this hour; Treasury note yields are falling, however, after gaining yesterday; and the U.S. equity futures are suggesting a lower opening when trading resumes later today on those mounting trade concerns. – Harvey S. Katz, CFA

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.