US stocks rose after Europe and China announced plans for additional stimulus to shore up their economies in the wake of a global trade war.China’s National Development and Reform Commission said Friday it would boost stimulus to shore up the country’s economy, stabilize employment and give people more disposable income. Although China didn’t elaborate on its plans, that was enough to soothe investors’ fears about the trade war’s harm to the global economy.
A strong U.S. retail sales report during a week many retailers are announcing earnings helped stabilize the stock market Thursday after sharp losses the day before. The Dow Jones Industrial Average(DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) seesawed between gains and losses but rallied toward the end of the session.
Today’s stock market
Index Percentage Change Point Change Dow 0.39% 99.97 S&P 500 0.25% 7.00
A solid quarter but weak outlook from Cisco
Network equipment leader Cisco Systems reported fiscal fourth-quarter results in line with expectations, but flat orders and weak guidance raised investor concerns, sending shares down 8.6%. Revenue grew 4.6% to $13.4 billion and adjusted earnings per share rose 19% to $0.83. Analysts were expecting the company to earn $0.01 less per share on revenue of $13.4 billion.
Sales in the Americas, Cisco’s most important region at 61% of revenue, grew 8.9% in Q4. But revenue from Asia-Pacific fell 3.8%, and CFO Kelly Kramer said in the conference call that the company’s business in China plunged 25%. Overall, gross margin improved 90 basis points from last quarter and 230 basis points from the period a year ago. Orders were flat year over year, and Cisco guided to Q1 revenue growth of between 0% and 2%.
Cisco’s challenges are centered on sales to service providers, especially Chinese telecoms, and orders would have been up mid-single digits if it weren’t for a 21% drop in orders to that segment. Those struggles with service providers overshadowed the company’s success in other areastoday.
Dow Jones futures turned higher Thursday morning, along with S&P 500 futures and Nasdaq 100 futures. Futures plunged after Beijing vowed retaliation vs. the new Trump tariffs, escalating the China trade war just two days after President Trump offered a partial reprieve on new China tariffs. Stock futures turned higher after China urged the U.S. to “meet halfway” on trade along with strong Walmart (WMT) results. The stock market rally already is reeling from Wednesday’s inverted yield curve, raising recession fears.
The drop comes as some forecasters warn of increasing odds of a recession, while President Trump has continued to hammer the Federal Reserve over its handling of interest rates.
In terms of point losses, Wednesday’s drop was the Dow’s 4th worst-ever day, though it did not crack the top 20 list in terms of percentage drops.
The latest plunge came after the yield for 10-year Treasury bonds fell below that for 2-year bonds, an economic indicator that frequently predicts a coming recession.
An escalating trade war between the US and China threw the stock market into chaos early Monday.
The Dow Jones industrial average plunged more than 600 points after China said it will hike tariffs on $60 billion worth of US goods — a tit-for-tat response to President Donald Trump’s hike of tariffs on $200 billion in Chinese goods last week.
China said it will impose tariffs on its US imports of to up to 25 percent on June 1. Many of the items, which had been subject to 10 percent tariffs, affected the US agricultural industry.
The Dow was recently off 632.62 points, or 2.4 percent, at 25,309.75. Market indexes were all down sharply as of 11:38 am ET, with the S&P 500 and tech-weighted Nasdaq plunging 2.4 percent and 3.2 percent, respectively.