Market Outlook – June 6, 2018

Apple & Netflix Lifts Nasdaq

 

The Nasdaq Composite Index posted two consecutive days of record close on Tuesday following the rally of Apple Inc. and Netflix Inc. (NFLX). The tech-heavy index was able to advance 31.4 points (+0.4%) because of the resurgence of the two most influential stocks in the sector.

The S&P 500 index rose 1.92 points or less than 0.1%, with consumer-staples and financials stocks falling 0.5% and 0.4% respectively. The Dow Jones Industrial Average Index finished lower by 13.71 (less than -0.1%) as the retreat in government bond yields took its toll on banks and other financial institutions. The shares of Goldman Sachs Group Inc. (GS) fell -0.67%.

G7 Meeting to Focus on Global Economy & U.S. Trade Policy

 

United States President Donald Trump will be attending the G7 leaders’ meeting on June 8 and 9 in Quebec, Canada. The discussions are likely to focus on the global economy and concerns about the U.S. trade policy.

The G7 finance ministers rebuked Washington last week over the metals tariffs and set the tone for a heated G7 leaders’ summit. Japan Chief Cabinet Secretary Yoshihide Suga said on Tuesday that it was important to maintain free and open trade in line with World Trade Organization rules.

Wall Street Forms ‘New’ Communications Services Sector

 

The U.S. stock market will have a deepened pool of telecommunications and media stocks by late September due to a sweeping reorganization of the Global Industry Classification Standard (GICS). The newly-defined sector will be known as “communications services sector.”

The communications services companies will now account for one-tenth of the S&P 500. Google parent Alphabet Inc. (GOOGL) and Facebook Inc. (FB) will move from the information technology sector to join AT&T Inc. (T) and Verizon Communications in a broadened telecommunication services sector.

The heavyweights from the consumer discretionary sector like Walt Disney Co. (DIS), Comcast Corp. (CMCSA), and Netflix Inc. (NFLX) will also be part of the newly created sector.

With this major shakeup, the funds that track the telecom, tech and consumer discretionary sectors will be forced to trade billions of dollars of stock to realign their holdings. The reorganization will take effect on September 28.

Facebook Admits Data Sharing Partnership with Chinese Firms

 

On Tuesday, Facebook Inc. (FB) confirmed they have data sharing partnerships with at least four Chinese companies out of the total 60 companies worldwide. Huawei Technologies is one of them. The world’s third largest smartphone maker has been the subject of investigation by U.S. intelligence agencies on security concerns.

The social media giant also named computer maker Lenovo Group, and smartphone makers OPPO and TCL Corp. as  among the companies that received access to some user data. The said firms signed contracts to re-create Facebook-like experiences for their users.

Members of Congress were alarmed by The New York Times report that said data of users’ friends could have been accessed without their explicit consent. Facebook denied the allegations. They said the data access was to allow its users to access account features on mobile devices.

Facebook said they have already wound down more than 50% of the partnerships. The agreement with Huawei would end later this week and that of the other three partnerships with Chinese firms too.

U.S. Might Lift Ban on ZTE Corp.

 

ZTE Corp. might be back in business soon. Reuters News reported that the second-largest telecoms equipment maker in China signed an agreement in principle that would lift the U.S. Commerce Department’s ban on buying from U.S. suppliers. However, a department spokesman said on Tuesday that “no definitive agreement has been signed by both parties.”

The imposition of the 7-year ban last April forced ZTE to cease major operations. ZTE  broke a 2017 agreement with the U.S. The Chinese company illegally shipped goods to Iran and North Korea.

Sources said the preliminary deal involves payment of a $1 billion fine against ZTE plus $400 million in escrow to cover any future violations.

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