Stocks opened in positive territory amid hopes that trade talks with China are warming up based on new media reports. The averages drifted near their opening prices for the first hour of trading, but then received a boost when Bloomberg said China had made a proposal at a previous meeting to cut the trade imbalance with the U.S. by $1 trillion. Although the White House was said to be skeptical of the proposal, the buyers swooped in an pushed the market to session highs in what has been a broad-based advance of more than 1% for the major averages.
ECONOMIC EVENTS: In the U.S., industrial production rose 0.3% in December, as expected, boosting capacity utilization to 78.7%. The University of Michigan's preliminary consumer sentiment reading for January plunged 7.6 points to 90.7, which was much weaker than the 96.8 reading that was expected.
On the trade news front, Bloomberg reported, citing officials familiar with the negotiations, that China offered to increase annual goods imports from the U.S. by a combined value of more than $1 trillion over six years in order to eliminate the trade balance between the two countries. However, the offer, made during talks in Beijing earlier this month, was met with skepticism by U.S. negotiators who want the trade gap to close even sooner, sources told Bloomberg.
COMPANY NEWS: Shares of Tesla (TSLA) are skidding after a memo to employees from CEO Elon Musk revealed the electric carmaker is cutting its full-time workforce by 7%. BofA Merrill Lynch analyst John Murphy, who previously said he believed Q3 was likely to mark peak profitability for Tesla for the near future, thinks this morning's headcount reduction backs up his thesis. Murphy maintained an Underperform rating and $225 price target on Tesla shares, which are down 9% near noon.
After warning earlier this week that Walmart (WMT) had opted to leave the CVS Caremark pharmacy benefit management commercial and Managed Medicaid retail pharmacy networks, CVS Health (CVS) and Walmart announced this morning that the companies have reached a multi-year agreement on terms under which Walmart will continue participating in the PBM networks. The companies are not disclosing the financial terms of the new contract, but CVS shares have reacted positively, gaining 3%.
Shares of Netflix (NFLX) are trading 2% lower after the streaming service reported quarterly results last night, with fourth quarter revenue missing Wall Street estimates and its earnings and revenue view for the coming quarter also falling short of consensus forecasts. Despite the revenue miss, multiple analysts maintained Buy-equivalent ratings on the stock and even raised their price targets, with several highlighting strong subscriber additions.
MAJOR MOVERS: Among the noteworthy gainers was Floor & Decor (FND), which rose 8% after UBS analyst Michael Lasser upgraded the stock to Buy and raised his price target on the shares to $37 from $29. Also higher were Bank OZK (OZK) and VF Corp. (VFC), which gained 14% and 12%, respectively, after reporting quarterly results.
Among the notable losers was Nautilus (NLS), which dropped 39% after its provided downbeat Q4 guidance and said it is embarking on an "aggressive cost-containment program." Also lower was Casa Systems (CASA), which fell 21% after providing lower than expected Q4 guidance and narrowing its fiscal 2018 view.
INDEXES: Near midday, the Dow was up 305.12, or 1.25%, to 24,675.22, the Nasdaq was up 86.97, or 1.23%, to 7,171.44, and the S&P 500 was up 33.67, or 1.28%, to 2,669.63.
Tesla
-32.14 (-9.25%)
Netflix
-9.52 (-2.70%)
CVS Health
+1.69 (+2.67%)
Walmart
+1.24 (+1.28%)
Floor & Decor
+2.24 (+7.55%)
Bank OZK
+3.91 (+14.17%)
VF Corp.
+8.265 (+11.28%)
Nautilus - now BFX
-4.43 (-37.67%)
Casa Systems
-2.97 (-20.63%)