Stocks climbed out of the starting gates Wednesday. Apple (AAPL) and Shire (SHPG) hoisted the Nasdaq. A surprise surge in July hiring countered fresh trade war threats form the White House. And Baidu (BIDU) dived, Alphabet (GOOGL) climbed, on reports that Google was preparing to re-enter China’s internet.
The Nasdaq Composite swung up 0.4% as Apple and Alphabet helped drive some early strength in tech stocks. Apple surged after its fiscal third-quarter report late Tuesday. Ireland-based Shire posted positive second-quarter results ahead of its $62 billion acquisition by Japan’s Takeda. Paycom Software (PAYC) set up for a possible breakout after its second-quarter results.
The Dow Jones industrial average edged a fraction higher, with Apple leading and tariff-sensitive CaterpillarCAT and 3MMMM posting the deepest early declines. The S&P 500 added 0.1%, with HanesBrands (HBI) taking the hardest early hit among S&P 500 stocks.
White House Amps Up Trade War Threats
China’s markets fell hard as news reports said some U.S. presidential advisers were pressing for a sharp increase in the proposed tariffs aimed at $200 billion in China-made goods. Reports said the administration was considering increases to 25% tariffs, vs. an initial 10% duty. The White House should make a decision on the broadened tariff schedule later in August.
The White House currently has 25% tariffs imposed upon China-made imports valued at $34 billion per year. It is preparing to launch equal penalties on another $16 billion in goods, as early as this week.
The Shanghai Composite dived 1.8%, and Hong Kong’s Hang Seng index pulled back 0.9%. Stocks in Japan powered higher, with Tokyo’s Nikkei 225 taking a 0.9% gain. Japanese stocks tracked a positive performance by U.S. markets on Tuesday, and were lifted by a declining yen.
In Europe, stocks fell in afternoon trade. The FTSE 100 in London tumbled 1.1%, while the Frankfurt in DAX dropped 0.5% and Paris’ CAC-40 held to a 0.1% decline.
Baidu Tumbles On Google’s Project Dragonfly
China-based search engine Baidu slumped nearly 6%, after reports said Alphabet’s Google was prepared to re-introduce its search services to China’s internet. Online news site The Intercept reported that Google’s project Dragonfly is a version of its search application that blocks results according to government sensibilities.
“The app has already been demonstrated to the Chinese government,” The Intercept reported, “the finalized version could be launched in the next six to nine months, pending approval from Chinese officials.”
Google’s current search services have been unavailable to most internet users in China since 201o, when Google exited the country due to censorship concerns.
Alphabet rose 1.4% in premarket trade. Baidu shares have been in a choppy consolidation since May. The consolidation has maintained steady support at its 40-week moving average. Wednesday’s premarket action implies an open sharply below that line of support.
Apple, Paycom Enter Buy Zones; HanesBrands Dives
Apple shares jumped more than 4% after reporting, late Tuesday, a 40% earnings increase and a 17% rise in revenue for its third quarter. Earnings of $2.34 a share on $53.3 billion in revenue were both easily above consensus views. IPhone sales came in at 41.3 million units during the quarter, just below targets for 42 million units. But dollar sales topped expectations due to price increases. Apple opened in a buy range, above a flat base buy point at 194.30.
Paycom Software traded more than 8% higher ahead of the open. The provider of cloud-based human capital management tools reported a 69% per-share earnings gain in its second quarter, and a 31% revenue advance, comfortably clearing analyst forecasts. Management also raised its third-quarter revenue guidance to above the consensus number. Paycom ended Tuesday a shade less than 9% below a 115.64 buy point in a double-bottom base.
HanesBrand toppled 17% lower following its second-quarter report. Earnings slipped 15%, more than expected, while a 4% revenue gain narrowly topped views. The company said it would not renew its contract with Target (TGT) for exclusive sales of the C9 athletic wear, after the agreement expires in 2020.
Burger King and Tim Horton’s restaurant chain owner QSR Brands (QSR) dropped 1.4% after reporting mixed second-quarter results.
Automakers Tesla (TSLA) and Ferrari (RACE) reports results after today’s closing bell.
Federal Reserve Curve Ball, Hiring Surges In July
The Federal Open Market Committee winds up its two-day meeting with a 2 p.m. announcement today. No change in policy is expected, but the post-meeting statement will be closely parsed for any change that might qualify the Fed’s accommodative stance. Any change would be likely to move the market.
U.S. non-farm employers added 219,000 workers in July, according to ADP’s National Employment report. That was far above June’s 177,000 new hires and blew out economist expectations for a decrease to 173,000. Mid-size businesses did 54% of the hiring, ADP said, with 82% of the job creation occurring in the services sector. Some 85,000 of the new jobs were in education, healthcare, leisure and hospitality.
June construction spending estimates from the Commerce Department, manufacturing gauges from the Institute of Supply Management and Markit roll out later in the morning. Automakers are also due to report June sales.
Oil prices remain volatile and, with weekly data due from the Energy Information Administration, could factor into Wednesday’s trade. West Texas Intermediate dropped 1.6%, to below $68 per barrel, in early trade, following a 2% dive on Tuesday.
