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Is The Stock Market Ready To Lift Off Again?

Stocks had no shortage of potential catalysts Friday morning, but the stock market didn’t seem much impressed in early trade.




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The question persisted: Are stocks about to balloon higher or is Friday just another day in stock-market purgatory?

The catalysts for the stock market included President Trump and China starting to talk nice again on the trade conflict; unexpectedly strong numbers on nonfarm payrolls; midterm elections that could lead to legislative gridlock; and earnings reports that ran the gamut from dazzling to lame.

The blue-chip Dow Jones industrial average rose 0.4%, while the small-cap S&P 600 added 0.6%. Large caps held up as the S&P 500 inched up 0.1%. The Nasdaq lagged with a nearly 0.5% loss.

Apple Falters

In after-hours trade Thursday, Apple (AAPL) fell while Starbucks (SBUX) rose. Both companies beat the Street’s consensus view on the top and bottom lines. Yet analysts worried about Apple’s iPhone sales, while finding encouragement in Starbucks’ beat on same-store sales.

Apple has towing power in the stock market. America’s biggest stock accounts for 8% of the Nasdaq’s weighting. In early trade Friday, Apple fell 6%.

Starbucks Up

Starbucks popped 11%. The coffee king can be seen as more of a general indicator: In a bad economy discretionary purchases are easy to trim. For example, earnings and revenue growth slowed for Starbucks during the recession of 2008-09 but picked up as the economy recovered.

Starbucks’ positive stock action confirms that the economy is doing fine.

On Friday morning, Chevron (CVX) and Exxon Mobil (XOM) rose on favorable quarterly results. Chevron gained 4%, but Exxon rose only 1.4%. The stocks were up despite light sweet crude’s drop to $63.43 a barrel.

Midterm Malaise

Trump’s recent conversation with China’s leader Xi Jinping reassured markets, but there’s little conviction that China or Trump are ready to back down.

In the meantime, the U.S. midterm elections are expected to deliver mixed results. If the Democrats take control of the U.S. House of Representatives and the Republicans keep their grip on the Senate, legislative gridlock could be the outcome.

From an economic standpoint, gridlock might be irrelevant. The Trump tax cuts will stay in place, and Trump’s tariffs can be either called off or eased at Trump’s choosing. Tariffs represent a tax increase, which counter the effects of the tax cuts.

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