By Sue Chang and Chris Matthews, MarketWatch
Tesla's stock slumps 13% on job cuts, profit warning
The stock market closed higher Friday, extending its winning
streak to a fourth session, on media reports that stoked hopes for
progress in trade talks between the U.S. and China. Optimism over a
potential bilateral deal helped to offset worries about the
prolonged partial government shutdown and mixed corporate
results.
U.S. markets will be closed Monday in honor of Martin Luther
King Jr. Day
(http://www.marketwatch.com/story/which-stock-markets-and-bond-are-closed-for-martin-luther-king-jr-day-2019-01-18).
How did the benchmarks fare?
The Dow Jones Industrial Average rose 336.25 points, or 1.4%, to
end at 24,706.35 for a weekly gain of 3%. The S&P 500 index
advanced 34.75 points, or 1.3%, to 2,670.71, gaining 2.9% for the
week. The Nasdaq Composite added 72.76 points, or 1%, to 7,157.23,
finishing out the week 2.7% higher.
What drove the market?
Upbeat expectations on trade were reinforced by a Bloomberg
report
(http://www.marketwatch.com/story/china-has-offered-to-ramp-up-us-import-purchases-to-1-trillion-per-year-report-2019-01-18)
that Chinese officials have offered to increase imports from the
U.S. by $1 trillion over the next six years, a plan that would
reportedly bring the U.S. trade deficit with China to zero by
2024.
The latest developments come on the heels of a Thursday report
from The Wall Street Journal
(https://www.wsj.com/articles/u-s-weighs-lifting-china-tariffs-to-hasten-trade-deal-calm-markets-11547754006?mod=hp_lead_pos1)
that U.S. officials were debating lower tariffs on Chinese imports
to give Beijing an incentive to make deeper concessions over the
trade dispute.
A Treasury spokesman walked back the report, telling the
newspaper that any bargaining positions remained "at the discussion
stage." The source also said neither Treasury Secretary Steven
Mnuchin nor U.S. Trade Representative Robert Lighthizer has made
any specific trade-related recommendations and talks were still
ongoing.
Meanwhile, investors continue to digest a new round of earnings
reports, including those from Netflix Inc. (NFLX), which reported
strong subscriber and profit growth
(http://www.marketwatch.com/story/netflix-earnings-and-subscriber-additions-beat-expectations-but-stock-falls-2019-01-17)
after the bell on Thursday but missed on revenue.
The U.S. government's partial shutdown is in its 28th day with
no sign of resolution amid warnings that a prolonged political
standoff will hurt economic performance.
U.S. industrial production rose 0.3% in December, the Federal
Reserve reported Friday morning, in line with expectations, per a
MarketWatch poll of economists.
The University of Michigan's consumer confidence index fell to a
more than two-year low of 90.7 in January, down from 98.3 in
December, and well below expectations of 97.5, according to a
MarketWatch economist poll.
New York Fed President John Williams, a voting member of the
rate-setting Federal Open Market Committee, said that the Federal
Reserve should respond "carefully" to a U.S. economy that appears
to be slowing, in a speech to the New Jersey Bankers Association's
Economic Leadership Forum.
Philadelphia Fed President Patrick Harker, a nonvoting member of
the FOMC, said in a speech that "overall the economy is doing
well," but that the good economy isn't yet benefiting some workers
who lack the skills and social capital get hired by companies in
need of labor.
What were analysts saying?
"We've generally have seen good corporate earnings" so far this
season, Mark Esposito, president of Esposito Securities told
MarketWatch.
"Other than a few exceptions, bank earnings have been good,
which reflects well on the overall economy," he said, pointing to
SunTrust Banks Inc.'s Friday earnings report as an example of a
regional bank outperforming expectations.
"With the shutdown slowly taking 0.1 percentage point of GDP
each week, the president knows a victory in resolving the trade war
can give him leverage on continuing his battle with Democrats on
his border wall funding," wrote Edward Moya, market analyst at
OANDA, in a note.
"Yesterday's Wall Street Journal report that Treasury Secretary
Steven Mnuchin reportedly proposed the idea of lifting some or all
the tariffs gave stocks a strong bid. It was quickly refuted by the
Treasury, but story shows how anxious markets are in looking for
positive momentum to continue with trade talks," he added.
Which stocks were in focus?
Tesla Inc. (TSLA) shares slumped 13%
(http://www.marketwatch.com/story/tesla-to-cut-jobs-by-around-7-says-ceo-elon-musk-2019-01-18)after
the company announced job cuts and warned on profits
(http://www.marketwatch.com/story/tesla-stock-tanks-as-layoffs-profit-comment-ignite-demand-fears-2019-01-18).
Netflix(NFLX) shares retreated 4%, indicating some
dissatisfaction among investors despite the streaming video service
giant's fourth-quarter results
(http://www.marketwatch.com/story/netflix-earnings-and-subscriber-additions-beat-expectations-but-stock-falls-2019-01-17)
and upbeat calls from Wall Street analysts
(http://www.marketwatch.com/story/netflixs-stock-drop-after-results-despite-upbeat-analyst-calls-2019-01-18).
Shares of American Express Co. (AXP) reversed direction to rise
1% after the financial-services company reported mixed
fourth-quarter results
(http://www.marketwatch.com/story/american-express-swings-to-profit-narrowly-misses-revenue-expectations-2019-01-17).
SunTrust (STI) rallied 4.6% after the bank reported
better-than-expected profits.
Shares of Tiffany & Co.(TIF) climbed 5.4% even after the
luxury jewelry retailer reported lower holiday-period sales from a
year ago and provided a downbeat full-year profit and sales
outlooks. The stock has fallen nearly 35% over the past six
months.
Eli Lilly and Co. (LLY) fell 2.2% after the company said
(http://www.marketwatch.com/story/eli-lilly-shares-slide-premarket-on-news-of-failed-trial-for-sarcoma-treatment-2019-01-18)
a late-stage trial of a treatment for sarcoma failed to meet its
main goals.
Shares of VF Corp. (VFC) jumped 12% after the parent company of
Vans and The North Face reported better-than-expected earnings and
sales.
How are other markets trading?
Markets in Asia surged
(http://www.marketwatch.com/story/asian-markets-rise-on-hopes-of-progress-for-us-china-trade-talks-2019-01-17),
led by a 1.4% jump for China's Shanghai Composite Index . In
Europe, the Stoxx Europe 600 rose 1.8%.
Crude oil traded higher
(http://www.marketwatch.com/story/oil-prices-push-higher-on-hopes-for-us-china-trade-progress-2019-01-18),
while gold settled weaker
(http://www.marketwatch.com/story/gold-prices-ease-head-for-slim-weekly-loss-as-stocks-point-higher-2019-01-18)
and the U.S. dollar was firmer
(http://www.marketwatch.com/story/positive-trade-sentiment-lifts-dollar-against-japanese-yen-2019-01-18).
--Barbara Kollmeyer contributed to this article
(END) Dow Jones Newswires
January 18, 2019 16:24 ET (21:24 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.