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VOL. 43 | NO. 6 | Friday, February 8, 2019

US stock indexes end mixed ahead of US-China trade talks

The Associated Press

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Wall Street capped a day of mostly listless trading with a mixed finish Monday as gains in industrial companies, banks and energy stocks outweighed losses elsewhere.

Small-company stocks fared better than the rest of the market as investors shifted focus away from the tail end of a relatively strong corporate earnings season and looked ahead to key trade talks between the U.S. and China later this week.

U.S. Treasury Secretary Stephen Mnuchin is leading a delegation set to meet with Chinese officials on Thursday and Friday. The talks are aimed at resolving a trade war that threatens to stunt global economic growth, in part by raising prices on goods for consumers and companies. The situation could get worse when a truce on tariffs expires in early March.

"The problem is, if this trade issue goes on long enough, it will metastasize itself to our economy, "said Sam Stovall, chief investment strategist at CFRA.

The Dow Jones Industrial Average fell 53.22 points, or 0.2 percent, to 25,053.11. The S&P 500 index rose 1.92 points, or 0.1 percent, to 2,709.80. The Nasdaq composite added 9.71 points, or 0.1 percent, to 7,307.90. The Russell 2000 index of smaller-company stocks gained 12.59 points, or 0.8 percent, to 1,518.98. European markets finished higher.

U.S. indexes spent much of the day wavering between small gains and losses on a light day of company earnings news.

Companies have mostly reported better-than-expected earnings for the last three months of last year. Still, concerns have been building about whether profits can keep growing this year, especially after companies' strong gains in 2018 following a sweeping corporate tax cut.

So far, 66.4 percent of companies in the S&P 500 have reported earnings, with 69 percent beating analysts' forecasts. Earnings growth comes in at 14.5 percent for the quarter. But some companies have tempered their outlooks and analysts currently expect a 2 percent contraction in the first quarter.

Signs that the global economy is slowing have also added to the market's worries about earnings in 2019.

Economists' fears of a global slowdown were given additional fuel from a report Monday showing Britain's economy had its slowest economic growth since the aftermath of the global financial crisis. Both Europe overall and China are contending with slower growth.

Traders also were keeping an eye on the negotiations in Washington aimed at averting another federal government shutdown.

Democrats and the GOP remained separated Monday over how much to spend on President Donald Trump's promised border wall. A Friday midnight deadline is looming to prevent a second partial government shutdown.

Even if the government shuts down again, it's not likely to have a major impact on the stock market, Stovall said.

"While shutdown is certainly a possibility, it's more of an annoyance," he said, noting that the market gained more than 10 percent during the last shutdown.

A surge in sales at Tim Hortons helped lift quarterly earnings for parent company Restaurant Brands. The company, which also operates Burger King, posted quarterly profit that topped Wall Street's forecasts. The stock added 2.1 percent.

Tesla got a boost from Canaccord analysts, who upgraded the stock from "Hold" to "Buy." The analysts noted that results for the last two quarters and the electric car maker's outlook have removed "significant concerns" about the production and profitability of the Model 3, the company's car designed for the mass market.

Meanwhile, LMC Automotive estimated that the Model 3 was the top-selling luxury car in the U.S. last year, outselling the Lexus ES by more than two to one. Shares in Tesla gained 2.3 percent.

Traders also bid up shares in Chipotle Mexican Grill. The restaurant chain hired documentary filmmaker Errol Morris to create ads showcasing its kitchens, prep routines and partners. Morris is the director of the Oscar-winning documentary "Fog of War."

The Mexican-food chain is still rehabilitating its image years after a series of food-borne illnesses scared away customers and drove sales lower. Chipotle shares rose 3.5 percent.

Loews' latest quarterly results put investors in a selling mood.

The commercial insurer tumbled 6.1 percent after it booked a fourth-quarter loss due to higher catastrophe losses.

Activision Blizzard shares sank 7.6 percent following a Bloomberg report saying the video game company plans to announce layoffs on Tuesday, when it's scheduled to report quarterly results. The report, which Bloomberg posted late Friday, cited unnamed people familiar with the matter.

Shares in rivals Take-Two Interactive and Electronic Arts took a beating last week after the companies gave investors a weak outlook for the current quarter.

On Monday, Take-Two slid 3.8 percent. Electronic Arts, which recovered Friday on strong sales of a new game, declined 0.4 percent.

U.S. benchmark crude fell 0.6 percent to settle at $52.41 per barrel in New York. Brent crude, the standard for international oil prices, dropped 1 percent to close at $61.51 per barrel in London.

Bond prices fell. The yield on the 10-year Treasury rose to 2.65 percent from 2.63 percent late Friday.

The dollar rose to 110.40 yen from 109.77 yen on Friday. The euro weakened to $1.1276 from $1.1324.

Gold fell 0.5 percent to $1,311.90 an ounce. Silver lost 0.8 percent to $15.69 an ounce. Copper dropped 0.7 percent to $2.79 a pound.

In other energy futures trading, wholesale gasoline slid 1.9 percent to $1.42 a gallon. Heating oil declined 0.8 percent to $1.89 a gallon. Natural gas rose 2.3 percent to $2.64 per 1,000 cubic feet.

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