US Stocks Ended April 6, 2018

The S&P 500 returned -1.35% last week, down for the third time in the last four weeks. Much of the negative performance can be attributed to intensified tariff concerns. China continued to respond to President Trump's protectionist policies with tariffs of their own. On Wednesday, China expanded their proposed tariffs to be levied on products from the U.S. China's equity markets were closed Thursday and Friday for a national holiday so the final drag on their markets remains to be seen. U.S. equity markets ended Thursday positive, after the White House doused trade war fears. However, on Friday President Trump threatened tariffs on $100b more Chinese products which forced equities lower. Overall, this talk has increased the threat of a trade war and caused volatility to spike, particularly in the riskier portions of equity markets. One such industry is semiconductors, which fell 4.8% last week as measured by the Philadelphia Stock Exchange Semiconductor Index. As odds of a trade war continue to grow, semiconductors, with significant Chinese manufacturing capacity, would likely be an industry highly affected. Turning to stock specific news, INCYTE Corp., a large cap biotech firm, was the worst performing stock in the S&P 500 index after returning -23% for the week. The company announced their Phase III melanoma drug failed to show a statistically significant improvement in patient progression-free survival rates. Although no formal deal has been announced, it has been reported that CBS Corp. has made a bid for content developer Viacom Inc. These two companies are very familiar with each other given that CBS spun off Viacom back in 2006 and Sumner Redstone still owns significant portions of both companies. Looking ahead to next week, quarterly earnings announcements are expected to start trickling in. The three U.S. mega-cap banks, Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. are all expected to report quarterly results. Overall, we remain constructive on U.S. equities as GDP and job data, along with corporate earnings remain strong. While equities contain risks, over the long run those who buy and hold tend to be rewarded for owning them.
Posted on Monday, April 9, 2018 @ 8:45 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.