Thursday, 26 July 2018

US stocks rally after US-EU talks but Facebook takes a hit

Markets were mixed on Wednesday.

The S&P 500 rose 0.9 percent and the Nikkei 225 rose 0.4 percent but the STOXX Europe 600 fell 0.3 percent.

US stocks rallied towards the close after US President Donald Trump made an announcement after a meeting with EU President Jean-Claude Juncker in Washington that the US and the EU will maintain a “close relationship” with “strong trade relations”.

The Nasdaq Composite jumped 1.2 percent to end at a record high but during the extended session, Facebook lost about one-fifth of its value after its earnings report missed expectations on revenue and the company said it expected revenue-growth slowdown to continue.

This could be troubling for the stock market as a whole. As Gluskin Sheff chief economist and strategist David Rosenberg said in a note, “a mere six stocks — Alphabet, Apple, Amazon, Netflix, Microsoft and Facebook” has kept the overall market rallying. The rest of the market “has done practically nothing year-to-date”.

Rosenberg added that such concentration was last seen in the late 1990s. “We know from history how these cycles typically end.”

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