Market Outlook – July 20, 2018

U.S. Indexes Consolidate Gains

 

With strong corporate earnings driving the market, the major U.S. indexes consolidated their gains on Thursday. As a result, the five-day rally ended. The Dow Jones Industrial Average shed 134.70 points (-0.5%) to end its longest winning streak in two months.

The S&P 500 Index lost 11.13 points (-0.4%) but stayed above the 2,800 mark. The financials stocks led the decline of the nine out of the eleven main sectors falling.  The Nasdaq Composite Index also declined, falling 29.15 points (- 0.4%).

The earnings season was in full swing on Thursday with individual stocks making their moves. U.S. President Donald Trump told CNBC that he wasn’t thrilled that the Federal Reserve was hiking interest rate. The comment somehow put pressure on the financial stocks.

Trump is Ready to Go 500

 

U.S. President Donald Trump threatened on Friday that he was prepared to impose tariffs on $500 billion of imported goods from China. Trump issued the threat during his interview with CNBC.

“We’re down a tremendous amount,” Trump said in the interview, which was recorded on Thursday, about trade imbalances with China. “I’m ready to go to 500.” This latest tirade will further escalate the current trade clash with Beijing.

Boeing Expresses Interest in U.K’s Fighter Jet Program

 

Boeing Co.’s (BA) Defense, Space & Security chief executive Leanne Caret told Reuters that the company is watching Britain and its plans to build a stealthy new future fighter jet called Tempest. The comment was made at the Farnborough Airshow this week.

The world’s largest plane maker would be “thrilled” to participate in the new British fighter jet program. Britain has yet to clarify or release details of the proposed project.

GE Reports 28% Drop in Quarterly Profit

 

General Electric Co.’s (GE) aviation and healthcare businesses were strong during the second quarter but the gains were offset by the weakness in the power business. On Friday, the U.S. industrial conglomerate reported a 28% drop in quarterly profit.

GE’s total revenue rose from $29.1 billion to $30.1 billion. However, earnings from continuing operations attributable to GE shareholders fell from $1.03 billion the previous year to $736 million in the second quarter ended June 30. Similarly, earnings per share from continuing operations fell to 8 cents from 12 cents. On an adjusted basis, the company earned 19 cents per share.

Honeywell Raises Forecast on Strong Q2 Earnings

 

Honeywell International Inc. (HON) reported a higher-than-expected quarterly profit on Friday. The company sold more aircraft parts and services to business jet and commercial airline customers. The increase in sales volume prompted the company to raise its 2018 earnings forecast for the third time.

The rise in global travel and the robust demand from the defense industry is beneficial to Honeywell. Sales in its aerospace division rose about 10% to $4.06 billion in the second quarter. Margins also expanded by 22.6 % (30 basis points).

The company makes the auxiliary power units, braking systems and other parts for Boeing and Airbus single-aisle planes. Honeywell adjusted its 2018 sales forecast from $42.7 billion-$43.5 billion range to $43.1 billion-$43.6 billion.

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