China's Response to Threats From President Trump Calms the Stock Market

Trade-sensitive stocks rally as the trade war with China continues to drive prices this week.
4 min read
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The major stock indexes were down more than two percent last Friday after President Trump threatened to increase tariffs again on Chinese goods, but rallied yesterday after China responded with surprising moderation. The U.S.'s largest trading partner said it would forego further tariff increases on American goods and hoped to settle the dispute with a "calm attitude."

The two countries may still be a long way from a trade deal, but China's response momentarily lifted investor sentiment. The Entrepreneur Index™ was up 0.52 percent in the last week while the Dow and S&P 500 indexes added 0.87 percent and 0.53 percent respectively. The tech-heavy Nasdaq Composite index had a decline of 0.23 percent in the last week.

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Trade-sensitive stocks got the biggest lift from China's uncharacteristically measured response. Semiconductor chip-maker NVIDIA Corp. jumped 3.59 percent, though it was still down 0.69 percent in the last week. Fedex jumped 2.79 percent yesterday. For the year, it is down 3.52 percent however. Vehicle manufacturers also fared well. Ford Motor Co. was up 2.41 percent on the week while truck manufacturer PACCAR Inc. gained 2.64 percent. Tesla jumped nearly three percent yesterday after China said it would exempt sixteen Tesla vehicle models from import taxes. The stock is up another three percent in pre-market trading this morning.

Retailers continue to be among the most volatile sectors of the market with the trade war and the ongoing ecommerce transformation wreaking havoc on stock prices. Most got a bump yesterday on the China news. Costco Wholesale Corp. was up 6.46 percent in the last week -- one of the biggest gains on the Entrepreneur Index™. The retailer had a huge response to the opening of an outlet in Shanghai this week, and its stock is now up 44.8 percent on the year. Walmart also had a good week, rising 2.02 percent. Its shares are up 22.2 percent this year.

The clothing retailers, however, continued to slide. Gap Inc. was down 7.39 percent on the week, largely because of five percent decline in sales of its most popular brand Old Navy last quarter. The stock is down 38.2 percent this year. L Brands had the biggest decline on the index, dropping 10.2 percent in the past week. The continuing struggles of Victoria's Secret lingerie and the murky relationship between company founder Les Wexner and alleged sex trafficker Jeffrey Epstein have hurt the stock, down 36.9 percent on the year.

 

Restaurant chain Chipotle Mexican Grill continued its impressive run this year. It was up 3.04 percent in the last five days and is now up 90.3 percent this year. Tyson Foods also gained 1.67 percent and is up 71.9 percent for the year.

Alexion Pharmaceuticals had one of the bigger declines on the Entrepreneur Index™ this week. It fell 5.49 percent in the last five days after Amgen, a rumored suitor for Alexion, bought psoriasis drug Otezla from Celgene for more than $13 billion. Alexion shares are down another eight percent in early trading this morning.

Other notable declines on the index this past week included J.M. Smucker Co., down 9.34 percent after it reported poor financial results this week. Asset manager Franklin Resources was down 2.3 percent and homebuilder D.R. Horton Inc. fell 2.01 percent on the week.

The Entrepreneur Index™ collects the top 60 publicly traded companies founded and run by entrepreneurs. The entrepreneurial spirit is a valuable asset for any business, and this index recognizes its importance, no matter how much a company has grown. These inspirational businesses can be tracked in real time on Entrepreneur.com.

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