Market Outlook – August 2, 2018

U.S. Stocks Close Lower on Fresh Concerns Over Trade

 

Fresh worries over U.S.-China trade friction dampened investors’ sentiment and drove U.S. stocks to close mostly lower on the first trading session of August. The Dow Jones Industrial Average shed 81.37 points (-0.32%) to close at 25,332.82 while the broader S&P 500 Index slid 2.93 points (-0.10%) to finish at 2,813.36. The tech sector in the S&P 500 was the best performer among the 11 sectors as it climbed 1.0%.

The Nasdaq Composite Index gained 35.50 points (+0.46%) to end Wednesday’s session at 7,707.29. Investors were comforted by the strong earnings growth of big tech firms despite the weakness of some companies. The biggest story was reserved for Apple Inc. (AAPL). The shares of the tech giant jumped +5.89% to post a record-high of $201.50.

Trump Proposes Higher Tariffs on Chinese Goods

 

United States President Donald Trump directed U.S. Trade Representative Robert Lighthizer to increase the proposed 10% duty on $200 billion worth of Chinese imports to 25%. The White House is exerting pressure on China for trade concessions by proposing a higher tariff percentage.

Trump wants Beijing to make fundamental changes to its policies on intellectual property protection, technology transfers and subsidies for high technology industries. China refuses to meet U.S. demands and has instead imposed retaliatory tariffs on U.S. goods.

Federal Reserve Maintains Status Quo on Rates  

 

The Federal Open Market Committee (FOMC) concluded its two-day meeting on Wednesday. The central bank’s policy-making body decided to skip an interest rate hike and voted unanimously to keep the target range for its benchmark rate at 1.75% to 2.0%.

However, two more rate increases are imminent this year which could happen in September and December. The Feds also upgraded their assessment of the U.S. economy. They acknowledged that economic activity has been rising at a strong rate and the labor market has continued to strengthen. Business fixed investment and household spending have likewise grown strongly.

Apple Nears $1 Trillion Market Capitalization

 

Apple Inc.  (AAPL) reported its highest-ever revenue for the three months ending in June which is typically a lean month for the tech giant. The robust sales of the iPhones pushed revenues higher to beat Wall Street expectations.

As of August 1, Apple Inc.’s market capitalization is $988.42 billion and is closing in on $1 trillion.  Analysts see the potential of AAPL hitting $250.00 but it will already become the first $1 trillion company when the stock reaches $203.45.

Tesla Posts Record Quarterly Loss

 

Tesla Inc. (TSLA) reported a record $717.5 million loss for the second quarter of 2018 but CEO Elon Musk appeared to have restored investor confidence with an apologetic gesture during the analyst call.

Interestingly, TSLA soared more than 9% in after-hours trading on Wednesday despite the huge loss. The electric carmaker registered $4 billion in revenue and forecast additional increases to its production capacity and profitability in the second half of 2018.

Musk said, “We believe we can be sustainably profitable from the third-quarter onwards.” He also boasted of “viral growth” of sales and a “mind-blowing leap forward” in vehicle production. Tesla produced 53,339 vehicles in the quarter and delivered 40,768.

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