Renewed Trade Talks Boost Tech Stocks: 5 Solid Buys
Zacks Investment Research | Dec 05, 2019 08:28PM ET
The U.S.-China trade war has been a major concern since mid-2018. Both countries have been imposing billions of dollars of tariffs on each other. This has impacted American tech stocks mostly due to their high exposure to China.
However, after several ups and downs, it seems that the phase one deal is coming soon thanks to positive comments from both China and President Donald Trump. In case this happens, tech stocks are sure to gain.
Phase One Deal in Making
The United States had scheduled 15% tariff on consumer goods worth $156 billion from China on Dec 15. And the market turned highly volatile on Dec 3 after President Trump said that a trade deal with China is unlikely before the 2020 U.S. elections. But the very next day, a Bloomberg report indicated that a partial trade deal would be completed before Dec 15.
Some communication on Dec 5, eased tensions. Beijing said, “China’s trade negotiations with the United States remain on track”, offering official assurance. Additionally, on the same day, Trump said that the U.S.-China trade talks are “moving right along.” He also clarified that “on December 15th, something could happen but we are not discussing that yet. We are having very good discussions with China, however.”
Tech Stocks Climb North
The report on trade talk progress not only snapped Wall Streets’ three-day losing streak, but also indicated that both the United States and China are closer on agreeing on how much tariffs would be rolled back in a “phase one” trade deal.
Evidently, a rise in tariff increases the price of U.S. goods sold to other countries. In this case, an additional 15% tariff means that Chinese consumers will have to pay extra for American products. The technology sector that is highly exposed to China has been bearing the brunt of a protracted trade war. Tech giants like Apple (NASDAQ:AAPL) had to suffer revenue loss as increased tariffs hiked the price of iPhones and other devices.
Semiconductor and chip stocks like Texas Instruments (NASDAQ:TXN) and Nvidia had seen stocks declining by nearly 5% in a single day due to tariff war. Chip manufacturers generate more than 50% of their revenues from China. So, higher tariffs have them looking for new customers as finished goods keep piling up.
Nonetheless, with positive developments on the trade front, the Technology Select Sector SPDR Fund (XLK) closed 0.4% higher on Dec 5, while the iShares PHLX Semiconductor ETF (SOXX) rose 0.5%.
Grab These Stocks Now
Given the positive developments on the trade front, if a U.S.-China phase one trade deal comes through, the tech space is sure to boom. We have shortlisted five stocks that flaunt a Zacks Rank # 1 (Strong Buy). You can see Zacks Investment Research
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