Wall Street edges higher on trade hopes, corporate earnings in the spotlight

Summary:

• Optimism over trade spurs gains on the global stock exchanges

• Nasdaq (US100) is testing key resistance zone and eyes attack on the 200-session moving average

• Johnson & Johnson (JNJ.US) announced it will acquire Auris Health in a $3.4 billion deal

Major stock market indices from Wall Street launched today’s session higher benefiting from gains seen earlier in Europe and Asia. Dow Jones (US30) is the strongest out of three major US indices while Nasdaq (US100) lags the most. Elsewhere, what one may find interesting is that VIX (VOLX) is also trading higher today. There are two main themes in today’s US newsflow - trade wars and border security.

Dow Jones (US30) is outperforming both S&P 500 (US500) and Nasdaq (US100) when it comes to the recovery from the late-2018 drop. The benchmark positively reacted to the 200-session moving average (purple line on the chart above). In turn US30 is trading at its highest level since early-December and may be set to test the resistance zone ranging around 26000 pts mark in the nearby future. Source: xStation5

Republicans and Democrats are said to have produced some kind of the border security agreement. However, the agreement, which was not presented to public yet, is said to include some details that are still subject to negotiation. Time is running short as if Donald Trump does not sign the bill by Friday midnight, the US government will be shut once again. Differences between politicians from both parties did not bode well but some kind of breakthrough may actually come from the US President himself. According to the Bloomberg report, Donald Trump is reluctant to see the US government being shut once again during his tenure and in turn is likely to sign a border security deal even if it does not include Wall funding he craves. Does this mean that Trump will stop chasing the idea of raising barrier on Mexico border? Of course not. One of the President’s aides cited by Bloomberg said that Donald Trump is likely to take advantage of his executive powers and look for Wall funding elsewhere, i.e. through national emergency measures.

Unlike Dow Jones, the NASDAQ index (US100) is still trading below the 200-session moving average (purple line). The benchmark is testing the upper limit of the resistance zone ranging 7000-7050 pts. Note that a break above the aforementioned zone and moving average would pave the way towards early-March 2018 peak around 7200 pts handle. Source: xStation5

Moving on to the trade front, it should be noted that somewhat upbeat remarks concerning US-China negotiations are the main reason behind today’s rally on the global stock markets. Donald Trump said yesterday that he may postponed tariff deadline beyond 1 March in case he sees a significant progress in trade talks. Moreover, reports spurred saying that the Chinese President, Xi Jinping, will meet on Friday with the US Trade Representative, Robert Lighthizer, and the Treasury Secretary, Steven Mnuchin. This is somewhat unexpected as the Chinese team of negotiators was said to be lead by the Vice Premier, Liu He. Attendance of the Xi shows China’s determination to strike a deal and raised expectations for this round of talks. This round is set to conclude on Friday and some kind of update for markets is expected then. Having said that, investors should keep an eye on any headlines coming from Beijing in the remaining part of the week and act accordingly.

Activision Blizzard (ATVI.US) is trading among S&P 500 leader while TripAdvisor (TRIP.US) can be found among the biggest laggards. Source: Bloomberg

Company News

Activision Blizzard (ATVI.US) is one of the best performing S&P 500 stocks today. The company released earnings report for the final quarter of 2018 yesterday after session close. Activision Blizzard showed disappointing revenue and net income while its EPS managed to beat median estimate just slightly. The company also issued weak guidance for the current year. Why is then its stock price raising? While it comes without doubt that Activision Blizzard’s past year was disappointing, markets cheered on company’s overhaul plans. Gamemaker plans to reduce its global workforce by 8% this year. Moreover, the company will increase investments into its leading franchises like for example Warcraft or Diablo.

On the other side of the S&P 500 quotation board we have TripAdvisor (TRIP.US). The company generated $346 million revenue, less than 1% above the median estimate, and EPS of just $0.27 (expected $0.283). While the financial data was mixed there are some especially downbeat points of the report. Namely, a range of analysts stressed weakness in the hotel segment as well as growing seasonality of TripAdvisor’s portfolio as potentially major hurdles to future growth.

Johnson & Johnson (JNJ.US) is probably the most interesting Dow Jones member today. The company announced that it will acquire Auris Health, the robotic-surgery company. The deal is worth $3.4 billion and is said to be settled in cash. Auris Health is one of the pioneers in the field of robotic-surgery therefore this acquisition may help Johnson & Johnson get an edge over its competitors in this new and promising branch of medical services market.