Stock futures angled sharply higher Monday, as a pause in the U.S.-China trade war and mergers and acquisitions news drove early gains.
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Futures for the Dow industrials traded nearly 1% above fair value as General Electric (GE), Caterpillar (CAT) and Boeing (BA) stock futures rolled up early gains.
S&P 500 futures climbed 0.6%. Nasdaq 100 futures maintained a 0.7% gain. NXP Semiconductor’s (NXPI) stock futures surged nearly 3% to lead the Nasdaq 100. Shares of Nasdaq (NDAQ) popped more than 4% in premarket trade, the biggest gain among S&P 500 stock futures.
Small caps hung back in early action, with Russell 2000 futures creeping up 0.2%.
Treasury Secretary Steven Mnuchin on Sunday said the Trump Administration was pushing back the threat of tariffs against China as was “putting the trade war on hold.” U.S. Trade Representative Robert Lighthizer took a harder line, emphasizing tariffs remained important to protecting U.S. technology.
The project for the Dow and S&P 500 this week will be to at least hold their ground after two weekly closes above their 50-day lines. Even a small advance to extend that gap would mark positive action. The Nasdaq has closed above its 50-day for the past three weeks. It has a bit more breathing room above that level of support. In addition, it is less than 4% from its mid-March high. The Dow is 7.7% and the S&P 500 is 5.9% off their highs.
Asian stock markets posted moderate gains Monday. The Hong Kong Hang Seng and Shanghai Composite indexes each rose 0.6%. In Japan, the Nikkei 225 added 0.3%. Europe’s markets were sharply mixed, as the FTSE 100 in London climbed 0.8% and Frankfurt’s DAX gained 0.7%, while the CAC-40 in Paris dropped 0.3%.
Merger Action: GE/Wabtec, Fifth Third/MB Financial, NXP/Qualcomm
On the Dow, General Electric charged up 1.4% after Reuters reported the company agreed to merge its diesel locomotive business with rail components and systems maker Westinghouse Air Brake (WAB), commonly called Wabtec in a deal worth $11 billion. Wabtec shares rose 1.4% ahead of the open. A six-week run up left the stock in a buy range on Friday, just above a 93.91 buy point in a 10-month cup-base.
Also on the merger front, Chicago-based MB Financial (MBFI) swept ahead 10% after Fifth Third Bancorp (FITB) announced it would acquire the bank in a cash-stock deal valued around $4.7 billion. Cincinnati, Ohio-based Fifth Third expects the combination to add to earnings in the first year. Fifth Thirds shares. briefly topped a 34.27 buy point in a first-stage cup base last week. They were unchanged in Monday’s premarket trade.
NXP Semiconductors popped 2.9%, as the paused trade war lifted hopes of a close to Qualcomm’s (QCOM) $44 billion effort to subsume the Netherlands-based chipmaker. The deal had been held up by Chinese regulatory scrutiny.
Stock Futures: Micron Leads IBD 50; Tesla Ups Model 3 Ante
Chip stocks were in motion. Skyworks Solutions (SWKS) and Micron Technology (MU) jumped more than 2% apiece to head the Philadelphia Semiconductor Index. Micron, an IBD 50 stock, is in a base-on-base pattern with a 63.52 buy point. However, the base is a late-stage pattern.
IPOs were among Monday’s early movers, with China’s IQiyi (IQ) and Snap parent Snap (SNAP) each up 2%, and China-based Qudian (QD) falling almost 3% after its first-quarter results. iQiyi ended Friday’s session back below a 20.60 buy point in an IPO base.
Apple (AAPL) surged 0.8%, and the four FANG stock tech leaders gained 0.7% or more.
Tesla (TSLA) jumped nearly 2%. CEO Elon Musk announced a high-end version of the company’s Model 3, weighing in with a price tag at $78,000. The base Model 3, priced at $35,000, is intended to be the company “mass-market” offering. Bloomberg reports that nearly a half million customers have paid $1,000 deposits for Model 3s. Tesla shares have been in a gradual decline since September.
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