Trump’s protectionist stance on trade led to sluggish trading on Wall Street. This is especially true, as a series of tariff talks between the United States and its other major allies are intensifying fears of a trade war and could even trigger a global recession.
Tariff Talks
Trade war fears surfaced in March when Trump levied a 25% tariff on steel and aluminum imports on countries around the world. The action has prompted a retaliatory action from U.S. allies and tit-for-tat import tariffs.
The turmoil intensified in recent weeks when Trump unveiled the list of Chinese goods worth $50 billion targeted for a 25% tariff, leading to retaliation from China with duties of “the same scale and strength.” In response, the United States again threatened to impose tariffs of up to $400 billion on Chinese goods on top of the $50 billion worth goods. Tariffs on $34 billion worth of Chinese goods, the first of a potential total of $450 billion are due to take effect on Jul 6.
Additionally, the latest report from the Wall Street revealed that Trump is seeking to bar many Chinese companies from investing in U.S. technology firms and block additional technology exports to China.
The trade dispute with European Union (EU) also deepened on Jun 22 after Trump tweeted that he would impose another 25% tariff, targeting imported autos from the European Union. The response came following the EU’s threat of 25% duties on $3.2 billion worth of American goods exported to the 28-member bloc, starting Jun 22, against U.S. tariffs on European steel and aluminum.
Canada and Mexico have also threatened against the use of American steel and aluminum imports. Canada is seeking duties on steel imports from the United States and on other goods including playing cards, inflatable boats, yogurt and toilet papers. The total value of American goods subject to tariff is $12.8 billion, effective Jul 1. Mexico plans to retaliate by targeting products from congressional districts that Trump’s Republican Party is fighting to retain in the November election. It would impose levies on a wide range of U.S. goods, some steel and pipe products, lamps, berries, grapes, apples, cold cuts, pork chops and various cheese products “up to an amount comparable to the level of damage” linked to U.S. tariffs.
Market Impact
The round of sanctions and retaliation has intensified the fears of a global trade war that would hurt the worldwide economy and corporate profits, particularly at big U.S. exporters. As such, large-cap stocks are struggling for the past three months given their substantial exposure to these countries.
However, there are still winners in many corners of the large-cap space that are easily surviving the trade turmoil. Below, we have highlighted five stocks from different corners of the market that have gained more than 40% in three months and have a solid Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks also have a market cap of at least $10 billion.
Lululemon Athletica Inc. LULU – Up 61.4%
An athletic apparel company designs and retails athletic clothing for women, men, and female youth. The stock saw positive earnings estimate revision of 30 cents for the fiscal ending January 2019 over the past three months and has an expected growth rate of 23.94%. With the market cap of $16.8 billion, LULU has a Zacks Rank #2 and falls under a top-ranked Zacks industry (top 28%).
HollyFrontier Corporation HFC – Up 50.4%
The company is engaged in refining petroleum, and produces and markets gasoline, diesel, jet fuel, asphalt, heavy products and specialty lubricant products. The Zacks Consensus Estimate for this year has moved up from $3.49 to $5.88 over the past three months. The company has a market cap of $12.6 billion and an estimated earnings growth rate of 153.45%. HollyFrontier has a Zacks Rank #1 and belongs to s top-ranked Zacks industry (top 36%). You can see the complete list of today’s Zacks #1 Rank stocks here.
ABIOMED Inc. ABMD – Up 50%
ABIOMED is a provider of mechanical circulatory support devices and offers a continuum of care to heart failure patients. The stock saw positive earnings estimate revision of 27 cents for this year over the past three months and has an expected growth rate of 42.86%. It has a Zacks Rank #1 and belongs to the top-ranked Zacks industry (top 37%). ABIOMED has a market cap of $19 billion.
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Twitter Inc. TWTR – Up 44.2%
Twitter is a public, real-time, global platform. The stock saw positive earnings estimate revision of 15 cents for this year over the past three months and has an expected growth rate of 70.45%. With a market cap of $34.5 billion, it has a Zacks Rank #1 and belongs to a top-ranked Zacks industry (top 32%).
Align Technology Inc. ALGN – Up 41.5%
This is a global medical device company with industry-leading innovative products such as Invisalign clear aligners, iTero Intraoral scanners, and OrthoCAD digital services. The stock saw solid earnings estimate revision of 20 cents for this year over the past three months and has an expected growth rate of 21.59%. It has a Zacks Rank #1 and belongs to a top-ranked Zacks industry (top 21%). Align Technology has a market cap of $28.3 billion.
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