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Stocks mixed, China trade talks continue

Emily McCormick
Reporter

U.S. stocks ended mixed after a choppy session Monday amid an ongoing stream of trade and government shutdown-related headlines.

The S&P 500 ( ^GSPC ) rose 0.07%, or 1.92 points, as of market close. The Dow ( ^DJI ) fell 0.21%, or 53.22 points, while the Nasdaq ( ^IXIC ) rose 0.13%, or 9.71 points.

This week, delegations from the U.S. and China are set to meet in Beijing, according to a White House statement Friday . Deputy-level negotiations will take place starting Monday, led by Deputy United States Trade Representative Jeffrey Gerrish, followed by further meetings headed by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday and Friday.

Equities narrowly eked out weekly gains at the end of last week amid concerns that the U.S. and China would not work out a trade deal ahead of a March 1 deadline, after which the rate of tariffs on Chinese-made goods is set to increase. Discussions last week in Washington did not produce a deal.

Between trade uncertainty and concerns of a global deceleration, economists have a host of detriments to choose from when making forecasts for the rest of 2019.

“While the Fed has reassured markets and incoming U.S. data have been robust, European data continue to disappoint and Europe’s policy response options remain limited,” analysts from Barclays wrote in a note. “Combined with high political uncertainty from Brexit, China-U.S. trade negotiations and potential U.S. tariffs on EU car imports, the global outlook remains fragile. Ultimately, a turnaround will depend again on the willingness and ability of China to provide stimulus.”

But this macro softness may not necessarily carry over to weakness in domestic equities, some argue. Namely, some market pundits have pointed out that the Fed’s more dovish tilt, improving domestic manufacturing data and a still-strong labor market provide a solid framework for stock performance this year.

“Our global equity strategists believe that the January risk rally is not a dead cat bounce, but that it will become more fundamental as Fed pause is digested, U.S. growth proves to be resilient and Chinese stimulus comes through,” analysts from JPMorgan wrote in a note. “In contrast to the 2H of last year, when the policy-growth tradeoff was poor, with hawkish Fed and growth decelerating, the current backdrop consists of a dovish Fed and increasing evidence of U.S. growth picking up, as seen in ISM new orders and payrolls rebounding. This is a good combination for stocks, in our view.”

To the analysts’ points, the Institute of Supply Management had reported February 1 that manufacturing sector new orders picked up in January, with the New Orders index rising 6.9 percentage points from December. And the U.S. had added far non-farm payrolls than expected in both January and December.

Elsewhere, investors continue to watch for signs that a deal has been reached to prevent the U.S. government from descending back into a partial shutdown. Lawmakers have until Friday to come to an agreement on a plan to provide funds for a host of government agencies as well as President Donald Trump’s promised border wall – a request that has resulted in a months-long standoff between congressional Democrats and the White House.

A major point of contention is over immigration detention policy, with Democratic and Republican lawmakers disagreeing on a potential cap on immigration detention beds.

Over the weekend, acting White House chief of staff Mick Mulvaney said on NBC that “you cannot take a shutdown off the table” if adequate appropriations for the border wall are not made.

STOCKS: Restaurant Brands posts strong earnings, Tesla shares land an upgrade

Restaurant Brands ( QSR ), the parent company of Tim Hortons, Popeyes and Burger King, delivered fourth-quarter earnings per share that topped Wall Street’s forecasts. Fourth-quarter adjusted earnings were 68 cents per share, or a penny ahead of expectations. Revenue of $1.39 billion was in-line with consensus estimates, according to Bloomberg data. Tim Hortons and Burger King led comparable same-stores sales strength, with 1.9% and 1.7%, respectively, in quarterly comparable sales.

Canaccord Genuity upgraded shares of Tesla ( TSLA ) to Buy from Hold and raised its price target $450, from $330 previously. Analysts from the firm anticipate that shares of Tesla will spike as it approaches its goal of building an affordable electric vehicle, and as EV penetration increases. They viewed favorably the recent price cuts for the company’s vehicles, which they said “are resulting in concrete movements towards the ultimate goal of an affordable $35,000 Model 3.” They added that the company is in a better cash position with “strong operating cash flow generation of $1.23B” and $3.7 billion in cash on the balance sheet, as of its latest quarterly report.

Third Point LLC, a hedge fund headed by activist investor Daniel S. Loeb, exited its positions in Alibaba ( BABA ), Microsoft ( MSFT ) and Netflix ( NFLX ) in the fourth quarter of 2018, according to a fund filing Friday . Loeb had said in November that he was cutting his firm’s position in technology stocks amid market concerns. In Friday’s filing, the fund also disclosed it increased its stake in Campbell Soup ( CPB ) by 16%, or 3 million shares.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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