Tariff Talk Helps Market Reach Third Day of Gains

Stocks were just loitering around most of Thursday until a news report on tariffs sent everything sharply higher late in the session. Those gains quickly moderated, but we were still left with a third straight day on the plus side.

A Wall Street Journal report stated that the U.S. was considering easing tariffs on Chinese goods while the two countries are negotiating their trade relationship. However, as we’ve grown accustomed to in this trade conflict, it’s just talk right now with nothing official. In fact, there were attempts to walk it back.

Nevertheless, after spiking and then pulling back a bit, the S&P still managed to rise 0.76% to 2635.96. The NASDAQ advanced 0.71% to 7084.46 as it waited on Netflix, while the Dow improved 0.67% (or nearly 163 points) to 24,370.10.

Before the tariff story, stocks weren’t doing much as the report from Morgan Stanley was rather disappointing, especially coming a day after solid performances from Goldman Sachs and Bank of America. MS missed on both the top and bottom lines; it was down about 4.4% on the day.

All in all, the big banks provided a solid start to earnings season, but tomorrow we shift over to technology.

The biggest real news of the day was the quarterly report from Netflix after the bell. The streaming giant gave us a mixed report with earnings that surpassed expectations but revenues that missed. Of course, the market wanted a blowout quarter so the actual results were a bit of a disappointment, though the stock is only down about 4% after hours as of this writing.

The big question now is how the market will respond to the news tomorrow. Not only do we have a three-day winning streak heading into Friday’s session, but we also have a three-week winning streak. Netflix may determine if we can keep this momentum going. 

Today's Portfolio Highlights: 

Options Trader: The portfolio added three new positions on Thursday, including Cree (CREE) and Copa Holdings (CPA). CREE is a semiconductor stock that Kevin thinks can get to $60, while CPA is a transportation company that should move past $100 again. The editor added a pair of bull call spreads in EACH name to capitalize on their gains.

For the third addition, Kevin added four calls in Rogers Communications (RCI), a Canadian national communications company that has a positive Earnings ESP for the quarter being reported next Thursday. The stock should take off if it beats. Make sure to read the complete commentary for specifics on which options to buy.

Income Investor: "Stocks posted another solid week on the back of decent bank earnings and more news about trade negotiations between the U.S. and China.

"We got results this week from the consumer-investment hybrids—including Citigroup, Bank of America, and JPMorgan—as well as investing giants Goldman Sachs and Morgan Stanley. For the most part, the story was similar for both groups; market volatility put a dent in segments like fixed-income, but otherwise, results were healthy.

"There were some blips in bank earnings, sure. JPMorgan missed EPS estimates for the first time in 15 quarters. Wells Fargo’s Fed-mandated cap on growth was extended beyond management’s original expectations. Morgan Stanley’s wealth management division was strangely sluggish in the period.

"But most of the big bank stocks are up on the week, and it’s clear that investors liked what they heard from the financials. This helped fuel positive momentum, which was extended in afternoon trading Thursday on the latest trade war news." -- Ryan McQueeney

Counterstrike: "After hours we got earnings from Netflix. Surprisingly, the stock isn’t moving that much. I assumed the stock would be at $300 or $400, but as I type its at $343, so only down slightly. Considering how much it has moved over the last few weeks I would take this as a win for NFLX investors.

"So, some good and some bad, but I think the market loves that recent price hike so the stock should be ok. And if NFLX holds up the market should be fine as well, especially the Nasdaq. We will see what happens tomorrow, but the fear of a big down move might have been mistaken.

"As I’m finishing the write up, Netflix is coming down a bit. Tomorrow will be a big day to give us a clue if the bear is back. Under $325, we could see selling in tech. Over $355, the bulls will be in full control. I really have no clue what they will do, but my instinct says gravity will play a part." -- Jeremy Mullin

All the Best,
Jim Giaquinto

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