S&P Weighed Down By Spanish Turmoil and Dollar Strength – Tech Shares Rebound on ZTE Rescue

In 10 seconds I’m going to tell
you why the markets are mixed. Hey, good afternoon. It’s Scott Garliss at
Stansberry Research. Today is Friday, May the 25th. This is your Newswire
Market Watch. Markets are mixed
this afternoon. The S&P and Dow are off
about 2/10 of a percent. The NASDAQ’s up around the same. A couple of things
going on here. One, the NASDAQ is outperforming
today on US-China talks. What’s going on is
there’s a headline that hit saying that the US is
said to have a deal allowing ZTE to stay in business. This is a positive for
US technology stocks, semiconductors in particular. What’s going on
is– the reason this is so important is the
Qualcomm’s acquisition of NXP semiconductor. The thinking is that
if the US extends an olive branch
for ZTE, then China is going to
reciprocate by having their Ministry of Commerce give
final approval on Qualcomm’s acquisition of
NXP semiconductor. This is the only stumbling
block left in the process. So this would help to
boost the acquisition potential in the semiconductor
space and valuations as well. In terms of the S&P, dollar
strength is weighing. The driver there is
additional political intrigue in the eurozone. Spanish Prime Minister
Mariano Rajoy, he’s had a no confidence
vote motion filed against him by the country’s
Socialist Party. Recall in the fall,
there was chatter of the Catalan separatists,
the Podemos Party and the Socialists
filing the same motion. It didn’t happen. But together, they
could form a majority and wind up controlling
the Spanish government. They’re considered
euro skeptics, so this is adding to the angst
around the political situation going on in Italy right now. So because 47% of S&P 500
revenues come from abroad, a higher dollar
is going to weigh because it could inhibit sales. Conversely, the Russell 2000
Index is going to benefit. The index is small cap focused. So it’s relatively
insulated to dollar swings. When multinationals are feeling
the impact of a higher dollar, domestic focused companies
are going to outperform. Next week we’ll be
paying close attention to the second take of first
quarter GDP, the Fed’s Beige Book, personal consumption
expenditures, and jobs data. This Memorial Day
please take a moment to remember the great
sacrifices that the men and women of the armed services
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