Trade Setup for Tuesday
US stocks may be well placed on Tuesday based on the hope that the trade war between the US and China may deescalate. Global stock markets gained ground on February 18 on news that the two countries will resume trade negotiations in Washington later this week after a round of discussions in Beijing last week.
The talks would be led by US Trade Representative Robert Lighthizer and China’s vice premier and chief trade negotiator Liu He and are aimed at preventing an increase in tariffs on Chinese goods by March 1.
Top 10 market trends of the day
Though the negotiations have been encouraging, no deal has been reached yet. If this remains the case until March 1, the 10% tariffs currently levied by the US of $200 bn worth of imports from China will rise to 25%.
As US markets reopen after being closed on February 18 for President’s Day, investors can watch out for developments on the Commerce Department’s take on a tariff levy of up to 25% on auto parts and imported cars. This expected levy is based on the study of the impact of imports of these goods on national security.
Crude oil prices have made 2019 highs as well as rising to their highest in three months due to supply cuts by OPEC. US sanctions on Venezuela and Iran have also pushed prices higher with Brent crude nearing $67 a barrel and US WTI crude inching towards the $57 a barrel mark.
Among economic indicators, investors can watch out for the National Association of Home Builders’ (NAHB) Housing Market Index for February. The monthly survey which assesses the situation of the single-family housing market by asking respondents to rate conditions for sale of new homes had printed at 58 (preliminary) for January.
Meanwhile, Cleveland Fed chief Loretta J. Mester – an alternate voting member of the Federal Open Market Committee – will be speaking on the economic outlook and monetary policy.
Overall, investor sentiment has remained bearish with 55% of fund managers feeling pessimistic about the levels of inflation and economy.
Another thing to watch out for is stock specifics like the filing of the initial public offer by denim giant Levi Strauss. It is noted that this IPO may cause investors to lose the shares of PVH and Ralph Lauren – its competitions.
There is expected to be an influx of IPOs with the new demand for capital but less to go around. Expected IPOs will be Uber – the biggest of all with a $120 billion expectation, followed by others such as Slack, Pinterest, Palantir, Lyft, Reddit, Postmates, Doordash, and Postmates.
The fear of competitor shares falling because of this is looming ahead. Slack can make Atlassian shares to be sold by fund managers. Palantir might trigger the sale of Proofpoint or Palo Alto Networks. Postmates and Doordash might affect GrubHub. Finally, a giant cash cow like Uber might edge selling out of giants like Facebook, Alphabet, Apple, and Amazon.
Previously, this trend has been noticed when a flurry of big IPOs has taken place, sell-offs take place in entire sectors.