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Small-cap stocks quietly rise to new all-time high

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Traders work on the floor of the New York Stock Exchange on November 18, 2016.

Brendan McDermid | Reuters

Traders work on the floor of the New York Stock Exchange on November 18, 2016.

The Russell 2000 index hit an all-time intraday high on Wednesday, sneaking past its large-cap counterparts amid lingering trade tensions between the U.S. and some of its key trade partners.

Wednesday’s record marks the Russell’s first since Jan. 24, about a week before equities fell into a 10 percent correction. The Dow Jones industrial average and S&P 500 have not made records since Jan. 26, while the Nasdaq composite hit its most recent all-time high on March 13.

The small-cap index has also outperformed the Dow, S&P 500 and Nasdaq over the past three months, rising more than 4.5 percent. The Dow and S&P 500 are down in that time period, while the Nasdaq has gained about 2 percent.

Large-cap stocks have failed to capture record highs recently as trade tensions between the U.S. and China remain. Both countries have unveiled tariffs targeting one another. While those tensions show signs of thawing, Commerce Secretary Wilbur Ross said Monday the gap between the U.S. and China “remains wide.”

The tariffs and retaliation from countries such as China put at risk large-cap companies that do a lot of business overseas. Small-cap companies, meanwhile, are less exposed to a trade war, given most of their business is domestic.

Companies in the Russell 2000 derive 21 percent of their revenue from overseas, on average, while the large-cap S&P 500 obtains 30 percent from outside the U.S., data from Bank of America Merrill Lynch shows.

“There’s no risk of trade wars around the revenues of these companies. I like that,” Kevin O’Leary, chairman of O’Shares ETF Investments, told CNBC’s “Halftime Report” on Wednesday about small-cap stocks.

He also noted investors are underestimating the boost small-caps will get from a lower corporate tax rate moving forward. “We’re going to see some big upside surprises in the next 24 months on these companies.”



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Tesla hires new chief financial officer for China

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Elon Musk, Chairman, CEO and Product Architect of Tesla Motors, addresses a press conference to declare that the Tesla Motors releases v7.0 System in China on a limited basis for its Model S, which will enable self-driving features such as Autosteer for a select group of beta testers on October 23, 2015 in Beijing, China.

VCG | Getty Images

Elon Musk, Chairman, CEO and Product Architect of Tesla Motors, addresses a press conference to declare that the Tesla Motors releases v7.0 System in China on a limited basis for its Model S, which will enable self-driving features such as Autosteer for a select group of beta testers on October 23, 2015 in Beijing, China.

Tesla Inc on Friday announced a number of key executive hires including former GE and General Motors executive James Zhou as its China CFO and Neeraj Manrao, a former Apple executive, as director of energy manufacturing.

Zhou previously served as CFO for Asia Pacific and India for Ingersoll Rand.

“We’re excited to welcome a group of such talented people as we continue to ramp (up) Model 3,” Tesla said in a blog post, adding it would announce more hires in the coming days.

China contributed around 17 percent of Tesla’s total revenue in 2017 and the electric carmaker has said it plans to build a gigafactory in the country.

The company on Wednesday slashed up to $14,000 off its Model X in China after Beijing announced major tariff cuts for imported automobiles.

Tesla has seen the departure of several senior executives and is also flattening its management structure as it seeks to improve efficiency and clear up production bottlenecks related to its new Model 3 sedan.



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Foot Locker shares are jumping 16% after a blowout earnings report

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Shoppers and pedestrians pass in front of a Foot Locker store on the Third Street Promenade in Santa Monica, California.

Patrick T. Fallon | Bloomberg | Getty Images

Shoppers and pedestrians pass in front of a Foot Locker store on the Third Street Promenade in Santa Monica, California.

Shares of shoe retailer Foot Locker surged Friday after the company reported earnings well ahead of Wall Street expectations.

The stock rallied more than 16 after the New York-based company reported adjusted earnings per share at $1.45 for the first quarter, above consensus estimates of $1.25 from FactSet.

The shoe store posted revenue of $2.03 billion, which also beat forecasts.

“The flow of premium product continues to improve, with increasing breadth and depth in the most sought-after styles from our key vendors,” CEO Richard Johnson said in a statement. “This led to first quarter results which were above our expectations. With the strength of our strategic vendor partnerships and our central position in youth culture, we continue to believe that we are poised to inflect to positive comparable-store sales growth.”

Foot Locker has been in hot water in recent months as Wall Street grows increasingly concerned with retailers. Fears that e-commerce giant Amazon may seek to expand into apparel have made it a tough year for Foot Locker shares, now down more than 22 percent over the past 12 months.

Last June, popular shoemaker Nike confirmed plans to sell a limited product assortment on Amazon’s U.S. website.

According to a 2017 survey by UBS, 13 percent of respondents indicated that they prefer to purchase Nike products on Amazon compared with the 9 percent who said they prefer to purchase the same products at Foot Locker.



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Roku shares jump after short-seller Citron reverses negative call

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People pass by a video sign display with the logo for Roku Inc, a Fox-backed video streaming firm, that held it's IPO at the Nasdaq Marketsite in New York, U.S., September 28, 2017.

Brendan McDermid | Reuters

People pass by a video sign display with the logo for Roku Inc, a Fox-backed video streaming firm, that held it’s IPO at the Nasdaq Marketsite in New York, U.S., September 28, 2017.

Shares of Roku spiked Friday after short-seller Citron Research said it is reversing its negative view on the maker of streaming players, given a major shift away from the traditional cable television subscription model.

“The move to cutting the cord and [over-the-top] advertising is real and it is a megatrend that Citron not only does not want to be short, but at this valuation I want to be long,” the research firm, headed by Andrew Left, said in a report Friday.

Roku shares briefly climbed more than 4.5 percent before paring gains to trade around $37 a share. The stock is down 28 percent for the year so far.

After the company went public in late November, the stock soared above $50 and Citron said it tweeted the stock would fall back to $28.

“BUT NOW EVERYTHING HAS CHANGED, AND IT IS TIME TO REEVALUATE,” the report said, in red capital letters.



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