Key Takeaways
- Trade deal hopes lift markets; small caps lead the gains
- Trump’s tariff comments cause sharp futures swings, highlighting sensitivity
- Bitcoin rallies; Coinbase acquisition hints at renewed crypto optimism
Stocks ended Thursday higher on hopes the current trade war is showing signs of reaching resolution. The S&P 500 edged higher by 0.6%. The Nasdaq Composite was up 1.1%. Small caps were the best performing group with the Russell 2000 up 1.9%, while the Dow Jones Industrial Average gained 0.6%.
Late Thursday morning, President Trump announced the framework for a trade deal with the U.K. had been reached. While details are scarce, I think the important thing for markets is whether or not trade negotiations can gain momentum from this. Few details were made available at the announcement and it’s also worth noting the U.S. already has a trade surplus with the U.K., therefore, this announcement isn’t likely to have much economic impact. Still, it could represent the first step forward for the broader trade war and may offer a springboard for negotiations with China, taking place this weekend in Switzerland.
If you wanted evidence of how sensitive this market is to the current trade war, President Trump’s post this morning about potentially lowering tariffs on China to 80% is proof. In the immediate aftermath of the post, S&P 500 futures quickly traded in a forty-point range. To give you some context, today’s total expected move is just under forty points.
Elsewhere, bitcoin is trading back above $100 thousand. Related to that is Coinbase, who announced earnings yesterday that missed estimates. However, the company also announced plans to acquire Deribit, which is the world’s largest trading platform for bitcoin and ether options. The deal is valued at $2.9 billion. Shares of Coinbase are indicated lower by 1.6% in premarket. I think the rally in bitcoin and the announcement of this deal is interesting and may suggest we’re beginning to see some of the optimism the crypto space hoped for with the current administration. Further supporting that idea, shares of Strategy are trading at new yearly highs. This company has become a proxy for bitcoin and after hitting a low of $231 back in March, shares are now trading above $420 in premarket.
We don’t have much in terms of economic data today; however, one situation worth monitoring continues to be the situation in India and Pakistan. India reported on Thursday it had intercepted missiles and drones launched by Pakistan. As I mentioned on Wednesday, we’re seeing a lot of companies move manufacturing to India and away from China. There are supply chain risks in doing that and should hostilities between India and Pakistan increase, there could be significant effects felt throughout the global economy. While this story is not getting the attention it probably deserves, it is one worth monitoring.
For today, I think we have an interesting situation heading into the weekend. As the U.S. and China engage in negotiations, I think markets are a bit on edge. The S&P 500 is coming up on its 200-day moving average, but as I’ve said before, it’s rare to see a market break through those levels on the first try. Yesterday, we came within about twenty points of that level before pulling back. If there is no news out of Switzerland before the end of the day, I would not be surprised to see volatility tick higher. I think markets are still trying to price in what the trade tariffs mean overall and while a lowering of them would certainly be positive, the fluidity of the situation is difficult to price in. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.