Stocks showed confident action Friday afternoon, despite President Trump’s implementation of tariffs on China. The tariffs on $34 billion in Chinese goods went into effect a minute after midnight.
China retaliated with tariffs on $34 billion in U.S. goods, primarily agricultural products such as soybeans. Other big news on Wall Street was the June employment report. An increase of 213,000 jobs was more than forecast, and wage growth was mild.
The Nasdaq climbed 1.3%, while the S&P 500 advanced 0.9%. The Dow Jones industrial average lagged with a 0.6% gain. Blue chips are seen as vulnerable to tariffs because many have huge revenue sources outside the U.S.
The small-cap S&P 600 rose 0.9%. Small caps are regarded as less vulnerable to a trade war since their revenue is often domestically based.
Volume was down on the NYSE and up on the Nasdaq compared with Thursday’s trade in the same hour. (For updates on this story and other market coverage, check IBD’s Stock Market Today.)
In the 30-component Dow, Caterpillar (CAT) initially took the hardest hit. The maker of heavy machinery fell 1.8% but then trimmed most of the loss.
Tariffs to some extent are already priced into the most vulnerable stocks. However, no one knows how far and how long the trade war will go. According to free-trade advocates the only certainty in a full-blown trade war is that almost everybody loses.
In the IBD 50, a list of some of the best stocks in fundamentals and technicals, gainers led losers by a 9-to-1 ratio.
Upscale retailer Lululemon Athletica (LULU), an IBD 50 member, popped 2.7% in below-average volume. The company is expected to grow earnings 25% in fiscal 2019 ending in January. More than 90% of revenue is from the U.S. and Canada, but the company is adding stores in China.
Bank of America analysts raised their price target on Lululemon from 121 to 140, about 9% above Friday’s intraday price.
Stocks breaking out of sound patterns were scarce.
February initial public offering Cactus (WHD) sailed above a 35.28 buy point but then reversed back into the handle. The IPO has formed a cup-with-handle base. Cactus makes wellhead equipment.
Crude Oil Up
West Texas intermediate crude oil rose 87 cents, or 1.25%, to $73.81 per barrel. Light sweet crude has been encountering resistance at the $75 level.
Among IBD’s 197 industry groups, biotechs, dairy and specialty retail were among the day’s leaders. Newspapers and discount retailers sank.