Market Outlook – September 11, 2018

Nasdaq Rebounds to End Losing Streak

 

The Nasdaq Composite Index had a good start this week. It snapped its four-day losing streak on Monday due to the recovery of tech shares. The tech-heavy index advanced 21.62 points (+0.27%) to end at 7,924.16.

In the S&P 500 Index, eight of its 11 primary industry groups finished in positive territory led by real estate and utilities sectors. The broader index tallied a gain of 5.45 points (+0.19%) and settled at 2,877.13. The Dow Jones Industrial Average dipped by 59.47 points (+0.23%) although the Dow Jones Transportation Average rallied to a record, climbing 1.8%. The blue-chip index closed at 25,857.07.

Both the S&P and the Nasdaq are coming from four straight days of decline. Last The S&P posted its first negative week last week out of recent four weeks. The weekly percentage drop was the biggest since June. Meanwhile, it was the biggest weekly drop for Nasdaq last week since March.

Oil Prices Climb as U.S. Tell Allies to Reduce Iran Imports

 

With the U.S. sanctions beginning to squeeze Iranian crude exports, oil prices rose on Tuesday. The situation also tightened global supply despite efforts by Washington to push other producers to increase their output.

Benchmark Brent crude oil LCOc1 was up 50 cents at $77.87 a barrel while U.S. light crude CLc1 was 15 cents higher at $67.69. Harry Tchilinguirian, an oil strategist at BNP Paribas, told the Reuters Global Oil Forum, “The path of least resistance for oil prices, given the supply fundamentals, remains up.”

The White House told its allies to reduce their importation of Iranian oil. Asian countries like India, Japan, and South Korea appears to be towing the line. However, the U.S. government doesn’t want oil prices to go up. A price increase could weaken economic activity or even trigger a slowdown in global growth.

Boeing Sees Higher Demand for New Planes

 

According to Boeing Co. (BA), Chinese airlines want to keep pace with booming consumer and business demand for air travel. Over the next two decades, the airline companies in China are expected to purchase 7,690 new planes worth $1.2 trillion. On Tuesday, the American plane maker raised its previous forecast.

Their latest estimate for the period up to 2037 is 6.2% higher than its 2017 prediction of 7,240 planes until 2036. Randy Tinseth, Boeing Commercial Airplanes’ vice president of marketing, in a statement, “The growth in China can be attributed to the country’s growing middle class, which has more than tripled in the last 10 years and is expected to double again in the next 10.”

Boeing and Airbus, its fiercest rival from Europe, have been competing intensely to increase their respective market share in the world’s fastest growing aviation market. Both companies are opening assembly plants in China.

Tesla Rebounds After Promising Profitable Q3

 

The shares of Tesla Inc. (TSLA) finished strong on Monday after CEO Elon Musk made a promise that the company will be profitable in the 3rd Quarter. Also on Monday, Baird and Bernstein analysts released bullish reports on Tesla.

As a result, TSLA jumped +8.46% to close higher at $285.50. The stock of the electric-car maker is off by -8.30% year-to-date. Bernstein sees that the near-term risk-reward for Tesla is quite skewed to the upside.

On the other hand, Baird believes that the Gigafactory 1 should be Tesla’s competitive advantage over the long term. The statement was made after the tour of the said factory by Baird representatives.

Cisco Chief Fears Fallout from New Tariffs on Chinese Goods

 

Cisco Systems Inc.’s (CSCO) CEO Chuck Robbins expressed fears the company might have to reckon with the fallout from the ongoing U.S.-China trade war. Robbins told CNBC’s Squawk Box on Tuesday that they will pass on the  higher prices to its customers.

In so far as the impact of the ongoing trade war, he said, “The tariffs that are suggested are across a lot of our core networking products, so it’s fairly significant.” The tech firm is having discussions with the Trump administration. They want to help the U.S. officials understand the implications of tariffs on many of Cisco’s products.

Aside from Cisco, Dell Technologies Inc. (DVMT), Hewlett Packard Enterprise Co. (HPE), and Juniper Networks Inc. (JNPR) sent last-minute appeals to the U.S. Trade Representative. They are requesting to remove some important products from inclusion  in a potential new round of tariffs.

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