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Facebook Plunge Dragging NASDAQ Lower, Easing of Trade Tensions With Europe Boosting Dow Industrials

The major U.S. stock indexes are trading mixed on Friday, reflecting their exposure to the technology sector and the easing of trade tensions between the United States and the European Union.

The main driver of the price action in the technology sector on Thursday is Facebook. The social media giant represents about 6.026 percent of the NASDAQ Composite Index. Shortly after the cash market opening, it is on pace for its worst one day performance in its history, down over 20 percent on a Q2 revenue miss and disappointing daily active user count.

After the initial news broke on Thursday, shares of Facebook lost about $120 billion in market value while dragging the rest of the technology sector lower. The so-called FAANG stocks – Facebook, Apple, Amazon, Netflix and Google (Alphabet) are also under pressure today on profit-taking. Amazon is set to release its earnings and revenue figures after the close today.

While the NASDAQ Composite is being weighed down by its exposure to technology stocks, Dow stocks are celebrating the easing of tensions over the U.S. trade dispute with the European Union. Shortly after the U.S. cash market opening, the Dow Jones Industrial Average is up over 100 points.

On Wednesday, President Trump announced that the U.S. and the European Union had initiated a “new phase” within their relationship, explaining how both regions would start collaborating in order to lower tariffs and avoid a potential trade war.

Dow components that were beat down during the height of the trade dispute crisis with Europe are roaring back on Thursday. Shares of Caterpillar are up about 0.8 percent. 3M, another company with large overseas revenue exposure, also rose about 1.4 percent.

Amazon Earnings

After the closing bell on Thursday, Amazon is expected to report a jump in profits when it reports second-quarter earnings on Thursday evening. Fueling the surge is expected to be continued growth of its higher-margin businesses, like cloud, advertising and third-party marketplace.

Analysts estimate Amazon will post second-quarter profits of $2.50 per share, or roughly $1.2 billion, according to a Thomson Reuters consensus estimate, up from the 40 cents per share reported a year earlier.

U.S. Economic Data

According to a U.S. government report, new orders for key U.S.-made capital goods increased more than expected in June and shipments surged, pointing to solid growth in business spending on equipment in the second quarter.

The Commerce Department said on Thursday that orders for non-defense capital goods excluding aircraft, rose 0.6 percent last month. Economists had forecast core capital goods orders rising 0.4 percent last month. The report also showed core capital goods orders increased 6.8 percent on a year-on-year basis.

Data for May was revised higher to show the so-called core capital goods orders increasing 0.7 percent instead of the previously reported 0.3 percent gain.

Energy Complex

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Thursday, rising in reaction to the news that Saudi Arabia suspended its oil shipments through a key Red Sea strait in response to an attack on two of its tankers.

Natural gas futures surged early Thursday after government storage data came in lower than expected. According to the U.S. Energy Information Administration, weekly natural gas in the U.S. rose by 24 billion cubic feet (bcf) in the week-ended July 20, below the estimate of 39 billion cubic feet.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.