Wall Street continues to bet that the trade war with China is nearly over.
The Dow soared 444 points, or 1.7%, on Friday in response to more progress on US-China trade talks.
The S&P 500 jumped 1.1%. The Nasdaq advanced 0.6%, gaining ground for the sixth day in a row.
For the week, the Dow surged 3%, notching its eighth straight weekly rally. That’s the longest such streak since the fall of 2017. The Nasdaq is also up eight weeks in a row for the first time since the summer of 2016.
Investors cheered further signs of progress on the trade front. President Donald Trump said on Friday that talks with China are going “extremely well” and will continue next week in Washington.
Banks led the rally, with Goldman Sachs (GS) and Morgan Stanley (MS) climbing 3% apiece. Mattel (MAT) plummeted 18%, its worst day since October 1999, after giving a weak outlook.
So much for that big turnaround for Mattel. The toy maker’s stock plunged nearly 20% late Friday, its worst drop in nearly 20 years, after executives warned during an analyst presentation at New York’s Toy Fair that sales for the first quarter of 2019 and profits for the full year wouldn’t be as good as hoped.
The news comes shortly after Mattel wowed Wall Street with better-than-expected results during the holidays, led by solid sales for its iconic Barbie and Hot Wheels toys. The company said in its presentation Friday that those brands should still do well in 2019 but that momentum may slow a bit.
Other problems? A stronger dollar is eating into its foreign sales – a problem that many big US multinational firms are facing. But Mattel also said that the demise of Toys “R” Us will continue to hurt it this year and that China sales will fall too.
Mattel’s (MAT) bleak outlook likely doesn’t bode well for rival Hasbro either. Hasbro reported weak holiday sales earlier this month as well. Hasbro (HAS) shares fell 4%.
Amazon (AMZN) hasn’t been shy about its plans to take more control of the package delivery process. That’s not good news for traditional delivery companies.
One of them, XPO Logistics, warned in its latest earnings report it was cutting its outlook due to “the impact of our largest customer substantially downsizing its business.” XPO Logistics added in its annual filing with the SEC that the decision will lead to a $600 million hit to its 2019 sales.
XPO Logistics wouldn’t name the customer. But Deutsche Bank analyst Amit Mehrotra said in a report it likely was Amazon. Several other analysts have speculated as such too. Amazon told CNN Business it had no comment.
A spokesperson for XPO Logistics remained hopeful though. “We intend to replace this business over time with other customers,” the spokesperson said. And CEO Bradley Smith noted during a conference call that its five biggest customers will only make up about 8% of its total sales this year.
But investors are nervous. XPO Logistics (XPO) plunged nearly 15% Friday – and that dragged down FedEx (FDX) and UPS (UPS) as well.
US and UK officials signed two agreements Thursday that will ensure $5 billion in trade isn’t disrupted between the two countries once the United Kingdom leaves the European Union.
The agreements don’t cover all trade between the two countries. Instead, they focus on telecom equipment, tech products, pharmaceuticals, and marine equipment, the US Trade Representative Office said.
On Friday, President Donald Trump said that the new agreements will strengthen an already strong trade relationship with the United Kingdom.
“So with the UK, we are continuing our trade and we’re going to actually be increasing it very substantially as time goes by,” Trump said.
Wall Street doesn’t care that President Donald Trump declared a national emergency. Investors are squarely focused on one thing: getting a China trade deal.
The Dow soared 335 points, or 1.3%, midday on Friday
While Washington debates the merits of Trump’s emergency declaration, investors are relieved that Congress and the White House have avoided another government shutdown. Even better from the market’s perspective, the border wall may not be used as a bargaining chip in a future fight over raising the debt ceiling.
Trump’s Friday press conference offered more hints of tentative progress on trade. The president said talks are going “extremely well” and he confirmed that China’s negotiators will come to Washington next week to continue negotiations.
Newell Brands (NWL) got badly left behind by the Friday rally. The maker of Sharpie markers and Graco strollers plummeted 20% after posting disappointing sales and guidance.
Electronic Arts has a huge hit with its new Fortnite-esque game Apex Legends. 25 million players in just one week. But the game could soon get another big boost from the world’s biggest market.
The South Morning China Post reported Friday that Chinese tech giant Tencent (TCEHY) is talking to EA (EA) about a deal to distribute the game in China.
A deal would obviously be great news for EA, whose shares have surged nearly 15% this month thanks to the success of Apex Legends – and despite the fact that the company reported weak earnings and a lousy outlook last week.
EA and Tencent were not immediately available for comment. But if Tencent does do a deal with EA, it will be interesting to see if that impacts playing time of Fortnite in China. That actually could be a problem for Tencent since it has a 40% stake in Fortnite developer Epic Games, the privately held company that’s now worth $15 billion.
Industrial production in the United States slid .6% in January, which was below expectations. The Federal Reserve also adjusted December’s reading lower.
Here’s more from our Matt Egan:
The dissolution of Toys ‘R’ Us is impacting another company: Newell Brands (NWL).
Shares plunged 17% following a dismal fourth-quarter earnings report. Partly driving the stock’s decline is a 3% drop in sales for its Graco baby products brand.
Newell said the “continued negative impact of the Toys ‘R’ Us bankruptcy” was the issue. The company sold strollers to Toys ‘R’ Us and Babies ‘R’ Us.
The company also adjusted its full-year sales range lower. Today’s plunge wipes out Newell’s year-to-date gains:
Hopes for trade peace between the United States and China continue to carry the stock market higher.
Markets were boosted by news that US-China trade talks will continue trade negotiations next week in Washington.
“That has turned what was a modestly negative tone to a modestly positive one,” Paul Hickey, co-founder of Bespoke Investment Group, wrote to clients.
Hickey added, “Let the record show that we are getting just as tired about typing subject lines related to Chinese trade talks as you are reading about them.”
Nvidia (NVDA) jumped 6% after posting guidance that wasn’t as bad as feared. Newell Brands (NWL), the maker of Rubbermaid and Sharpie markers, tumbled 14% on a sales miss and tepid guidance.
Caesars Entertainment (CZR) gained 2% as billionaire investor Carl Icahn reportedly pushed the casino operator to sell itself.
Warren Buffett’s Berkshire Hathaway has sold its entire stake in Oracle — an investment it held for just one quarter.
A regulatory filing by Berkshire Hathaway (BRKA) on Thursday revealed that it sold over 41 million shares in the software company before the end of 2018. The stake was worth more than $2 billion when it was first disclosed in November.
Buffett’s legendary investment company has also trimmed its stake in Apple (AAPL). Berkshire Hathaway owned 249.6 million shares in the iPhone maker as of December 31, a reduction of 1% from the previous quarter.
Shares in Oracle (ORCL) and Apple were both slightly lower during premarket trading.
Coca-Cola says 2019 will be volatile. Pepsi said this year will be just fine. Both say sales will grow 4%.
What gives?
“They have a different geography set than we do,” PepsiCo CFO Hugh Johnston told CNN Business on Friday.
PepsiCo (PEP), which reported its full year and fourth-quarter earnings on Friday, expects a 2% drag on its growth from foreign exchange rates in the coming year. Coca-Cola, which reported earnings on Thursday, said it expects that figure to be at around 6 or 7%.
Despite their soda rivalry, Coca-Cola and Pepsi are very different companies: Coke is all about beverages, while Pepsi has a big snack business which includes Frito-Lay and Quaker.
Johnston told CNN Business he expects 2019 to be “benign” and “favorable” to the company’s bottom line. Meanwhile, Coca-Cola (KO) CEO James Quincey said on CNBC’s “Squawk on the Street” Thursday morning that this year will “be more volatile and uncertain than 2018.”
Coke had its worst trading day since 2008 on Thursday. But investors don’t seem too worried about Pepsi’s 2019 forecast. Shares of the company were up about 2% before the bell.
Farmers are still worried about the administration’s tariffs and ongoing trade wars, according to farming equipment company Deere & Company (DE).
CEO Samuel Allen highlighted the anxiety in the company’s gloomy first-quarter earnings report:
Allen said the company hopes to “soon have more clarity around trade issues” and is “cautiously optimistic” for 2019.
The stock is down roughly 4% in premarket trading, erasing nearly half of its year-to-date gains.
Nvidia (NVDA) is moving 6% higher following a strong earnings report in which it beat expectations.
It’s a welcome turnaround for investors after the chipmaker issued a an ominous warning just two weeks ago regarding its 2019 outlook because of “deteriorating macroeconomic conditions.”
With today’s premarket surge factored in, the stock has recovered its losses since the late January warning.
Caesars Entertainment (CZR) is surging nearly 7% following a report that billionaire activist Carl Icahn, who has a 10% stake in the company, is pushing the casino and resort owner into a sell.
The Wall Street Journal scooped that some of Caesars shareholders have asked Icahn to help push for a sale and that he hasn’t “ruled out launching a proxy fight.”
Caesars had a brutal 2018. The stock lost nearly half of its value because of lower room rates at its Las Vegas hotels, such as the iconic Caesars Palace.
But it has nearly recovered all of its losses this year and shares are up roughly 45%. Caesars releases earnings next week.
PepsiCo (PEP) is about to post earnings for the fourth quarter of 2018.
The food and beverage maker has been expanding its portfolio of healthy foods and drinks as consumers turn to more low-calorie, sugar-free options.
It’s a tough market. Pepsi rival Coca-Cola (KO) had its worst day since October 2008 on Thursday, plunging 8%. The company said in an earnings report that sales declined 10% in 2018 and it issued disappointing guidance for 2019, citing the global economic slowdown, a strong US dollar and political uncertainty.
US stock futures were pointing lower earlier this morning due to disappointing economic data and trade worries. They’re now in positive territory.
The latest round of trade talks between high-level US and Chinese delegations has wrapped up in Beijing. It wasn’t immediately clear how much progress was made during this week’s discussions, but US Treasury Secretary Steven Mnuchin described them as “productive.”
Negotiators from the two countries have been trying to strike a deal before March 2, when the US government is due to raise tariffs on $200 billion of Chinese goods. President Trump has indicated he might be willing to extend that deadline if a deal is close.
Investors are also worried about data released Thursday that showed a surprise drop in US retail sales for December.
