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Stocks Up On China Tariff Talks; Lulu Offers Bold Entry

U.S. stock indexes took confident steps forward as tariff talks began in China. Negotiators are meeting in Beijing in an attempt to end a nine-month standoff on trade.




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The Nasdaq rambled 1.4% higher, while the S&P 500 added 1%. Small caps led with a 1.4% gain in the Russell 2000. Blue chips lagged, with the Dow Jones up 0.6%.

Shanghai’s composite index posted a 0.7% gain for the day.

Volume declined on both major U.S. exchanges compared with the same time Friday.

Bulls are hoping that the U.S. and China can come to a trade agreement, but critics say an agreement with China is all about compliance. China has a history of stalling after making promises, critics say.

Top Stocks Rise

Action among top-rated stocks improved.

In the IBD 50, a list of some of the best stocks in fundamentals and technicals, software and retail stocks were posting solid gains. In the software camp, Five9 (FIVN) gapped up 9% in heavy volume; Atlassian (TEAM), broke out with an 8% gain in huge turnover; RingCentral (RNG) popped 5%, albeit in soft trade.

Among retail and leisure stocks, restaurant chain Wingstop (WING) rose 6% in volume 60% above average. Variety store chain Five Below (FIVE) advanced 5% in strong volume. Internet TV show provider Netflix (NFLX) surged 5% in fast turnover. Apparel retailer Lululemon Athletica (LULU) retook its 50-day line with a 3.8% gain.

Lululemon’s relative strength line is rising but not yet at a high. The weekly chart shows Lululemon climbing above a trend line drawn from early October to early December to early January. Aggressive investors could use the trend line as an alternative entry.

In fiscal Q3 ended in October, Lululemon grew its e-commerce sales in China by 76%.

Blue Chips Mixed

Blue chips were mixed. In the 30-component Dow Jones, Home Depot (HD) scored a 2% gain in below-average volume. On the down side, Coca-Cola (KO) fell 0.8% in slow trade.

Among IBD’s 197 industry groups, tobacco and utilities trailed the market. Besides retail, biotech stocks and automakers advanced confidently.

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