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Dow Recovers by Over 350 Points: Don’t Fall into Market Trap


May. 14 2019, Published 2:57 p.m. ET

The broader-market recovery

Today, the broader market was on a strong path of recovery after posting massive declines yesterday and last week. Today at 1:33 PM ET, the Dow Jones industrial average was trading near 25,675, up 353 points or about 1.4% from yesterday’s closing price. At the same time, the S&P 500 Index and NASDAQ Composite Index were trading with 1.4% and 1.7% day gains, respectively. Today’s sharp recovery seems to be enough to regain investors’ confidence and attract them into buying stocks.

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It’s very important for investors to recall the key factor that triggered a massive broader market sell-off last week, which continued until yesterday. The possibility of an escalation in the US-China trade tensions started the market sell-off last Monday, which continued the whole week as President Donald Trump warned against China raising tariffs. Trump’s decision to raise tariffs on Chinese imported goods worth $200 billion to 25% came into effect on Friday.

Yesterday, China retaliated by announcing an increase in tariffs on US imported goods worth $60 billion effective June 1 in retaliation to Trump’s decision. These trade tensions remain intact even today, which could result in another round of market sell-off in the coming days. So investors should remain cautious and wait for a firm basis for a market recovery before buying stocks.

Recovery in large ETFs and their top holdings

Today at 2:20 PM ET, the growth-centric SPDR S&P 500 ETF  (SPY) and the tech-focused Invesco QQQ Trust were trading with 2.5% and 2.6% gains respective for the day. At the same time, tech companies Microsoft (MSFT), Apple (AAPL), Amazon.com (AMZN), and Facebook (FB) were up by 1.8%, 1.9%, 1.6%, and 0.5%, respectively.

Interestingly, Microsoft, Apple, Amazon, and Facebook are among top four holdings of both the SPDR S&P 500 and Invesco QQQ Trust. Yesterday, SPY and QQQ fell 2.5% and 3.5%, respectively due to a massive broader-market sell-off, including tech stocks. One of the funds’ largest holdings, Apple, tanked 5.8% yesterday.


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