Futures for the S&P 500 index, Dow Jones industrial average and Nasdaq 100 rose modestly vs. fair value Sunday evening. Look for Trump stocks U.S. Steel (X), Nucor (NUE), Steel Dynamics (STLD), AK Steel (AKS) and aluminum maker Alcoa (MT) to rally Monday on reports that President Trump backs high steel and aluminum tariffs on imports. Meanwhile, Palo Alto Networks (PANW) kicks off a big week for top-rated software earnings and cybersecurity news.
X The major averages rallied strongly on Friday, finishing the week positive after several weak closes. The S&P 500 index and Dow Jones retook their 50-day moving averages while the Nasdaq composite snapped a four-session losing streak.
Treasury yields and Fed rate hike expectations remain a key factor. The 10-year yield hit a fresh four-year high of 2.95% Wednesday intraday after Fed minutes from the Jan. 30-31 showed that policymakers expected faster economic growth than before. But yields pulled back below 2.9% by the end of the week as Fed officials and a Fed report allayed concerns of more than three rate hikes in 2018.
S&P 500 futures climbed 0.25% vs. fair value. Dow Jones futures rose 0.3%. Nasdaq 100 futures advanced 0.3% vs. fair value.
Trump Favors Stiff Steel Tariffs
President Trump favors imposing a 24% duty on all steel imports, according to multiple reports that began coming out late Friday. That would adopt the harshest option suggested to him by the Commerce Department last month. He also favors up to 10% tariff on all foreign aluminum shipments to America, even more than the top Commerce recommendation.
But steel and aluminum stocks rallied late Friday. U.S. Steel rose 4.3%, Nucor 2.3%, Steel Dynamics 1.4% and AK Steel 4.8%, while Alcoa edged up 0.9%. U.S. Steel, Nucor and Steel Dynamics are all close to highs while Alcoa is modestly off its peak. AK Steel is still in a long downtrend.
Keep in mind that the White House said Friday that Trump has made no decision yet. If he doesn't impose new tariffs, or sets them lower than reports suggest, these Trump stocks could face a Trump slump.
Steelmakers were among the early Trump stocks after Donald Trump won the presidency. They were seen as triple winners from his policies: tax cuts, infrastructure spending and support for protectionist measures. But after a late 2016 spike, steel plays such as U.S. Steel, Nucor and leading ETF VanEck Vectors Steel (SLX) began to move sideways or slump as the Trump administration didn't move aggressively on trade or infrastructure. But with tax cuts passed and Trump making another infrastructure and poised to act on tariffs, steelmakers are once again Trump stocks.
The VanEck Vectors SLX ETF has been outperforming the S&P 500 index since last June and especially since mid-November.
Palo Alto Networks Earnings Due
The cybersecurity firm reports fiscal Q2 earnings late Monday. Analysts expect earnings per share of 79 cents, up 25% vs. a year earlier. Revenue should climb 24% to $524.75 million.
During the brief stock market correction, Palo Alto never closed below its 50-day line and by Feb. 14 was back above a 156.95 entry. Shares hit a record 167.73 on Wednesday, setting a closing high of 165.54 on Friday.
Meanwhile, Fortinet (FTNT) will hold an analyst day on Tuesday while FireEye (FEYE) will holds its event on Thursday.
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