Wall Street rises as Huawei reprieve boosts tech shares

Late on Monday, the United States granted the Huawei a license to buy US goods until Aug 19.
Late on Monday, the United States granted the Huawei a license to buy US goods until Aug 19. PHOTO: REUTERS

NEW YORK (REUTERS) - Shares of technology companies helped lift Wall Street on Tuesday (May 21) after the United States temporarily eased curbs on China's Huawei Technologies Co Ltd, alleviating investor concerns about pressure on future corporate results in the sector.

US President Donald Trump added Huawei to a trade blacklist last week, leading several companies to suspend business with the world's largest telecom equipment maker, a move that could weigh on their sales. Chipmakers, many of which sell to Huawei, bore the brunt of Monday's sell-off.

But late on Monday, the United States granted the Chinese telecoms equipment maker a license to buy US goods until Aug 19. The development offered a reprieve to shares of chipmakers, with the Philadelphia Semiconductor Index gaining 2.1 per cent to end a three-day slump.

Shares of Huawei suppliers such as Intel Corp, Qualcomm Inc, Xilinx Inc and Broadcom Inc rose between 1 per cent and 4.6 per cent.

Technology shares rose 1.2 per cent to add the most gains to the S&P 500 among the benchmark index's major sectors.

"The groups that have been beaten up for the past couple of days have gotten a reprieve," said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta.

"Huawei cast a cloud over tech. It's so broad-based in how many companies connect with it."

 
 

The Dow Jones Industrial Average rose 197.43 points, or 0.77 per cent, to 25,877.33, the S&P 500 gained 24.13 points, or 0.85 per cent, to 2,864.36 and the Nasdaq Composite added 83.35 points, or 1.08 per cent, to 7,785.72.

Even with Tuesday's gains, the S&P 500 is still on track to post its first monthly decline of the year. The index is now 3 per cent away from its all-time high on May 1 as it has been pressured by mounting concerns about a prolonged US-China trade war.

"The market is so tied to a single news story that it's creating sharp swings on a daily basis," said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York.

"Much of the market volatility is also about the fact that we're up 20 per cent from the lows of late December. It's fully valued right here."

Among the S&P 500's major sectors, only defensive consumer staples shares traded lower, down 0.3 per cent.

Shares of Kohl's Corp and J.C. Penney Co Inc plunged after the two department stores' quarterly results missed expectations.

Kohl's shares dropped 12.3 per cent, the largest decline among S&P 500 companies, after the retailer cut its full-year profit forecast and reported quarterly same-store sales and profit that missed expectations.

Shares of rival J.C. Penney fell 7.0 per cent after the company also reported a bigger-than-expected fall in quarterly same-store sales.

With 463 of S&P 500 companies having posted first-quarter results, 75.2 per cent have topped analysts' profit expectations.

Analysts now expect first-quarter earnings growth of 1.4 per cent, a sharp turnaround from the 2 per cent loss expected on April 1, according to Refinitiv data.

Advancing issues outnumbered declining ones on the NYSE by a 3.56-to-1 ratio; on Nasdaq, a 2.30-to-1 ratio favored advancers.

The S&P 500 posted 38 new 52-week highs and five new lows; the Nasdaq Composite recorded 53 new highs and 81 new lows.

Volume on US exchanges was 6.09 billion shares, compared to the 6.97 billion average for the full session over the last 20 trading days.