US Stocks at Records on Trade Deal Hope12/12 16:35
The S&P 500 and Nasdaq closed at all-time highs Thursday on renewed optimism
that the U.S. and China are close to reaching a deal in their costly trade war.
(AP) -- The S&P 500 and Nasdaq closed at all-time highs Thursday on renewed
optimism that the U.S. and China are close to reaching a deal in their costly
Financial, technology and health care stocks powered much of the rally,
which gave the S&P 500 its second straight gain and erased its losses from
earlier in the week.
Bond yields surged and real estate companies, utilities stocks and household
goods makers fell as investors shifted money away from safe-play investments.
The market has been quick to react to headlines and remarks out of the Trump
administration about the 16-month trade war, and Thursday was no different.
Shares jumped in the early going after President Donald Trump said that the
U.S. is getting close to a "big deal" with China. Traders were also encouraged
by a Wall Street Journal report saying Washington has offered to slash existing
tariffs and cancel new ones set to kick in on Sunday in exchange for more
agricultural purchases and intellectual property protection.
"If we do see the tariffs removed, that's saying, ?OK, China must be
agreeing to things or we must be right there,'" said Ben Phillips, chief
investment officer at EventShares. "That's why the market is looking at tariffs
as the bellwether to a trade deal."
The S&P 500 climbed 26.94 points, or 0.9%, to 3,168.57. The index is up
about 0.5% from its last all-time closing high on Nov. 27.
The Dow Jones Industrial Average rose 220.75, or 0.8%, to 28,132.05. The
Nasdaq gained 63.27 points, or 0.7%, to 8,717.32. The index, which is heavily
weighted with technology stocks, is now up about 0.1% its record set on Nov. 27.
The Russell 2000 index of smaller company stocks climbed 12.89 points, or
0.8%, to 1,644.81.
China's Ministry of commerce said Thursday that its negotiators were in
"close communication" with their American counterparts ahead of the new round
of tariffs, but gave no indication whether the trade talks were making progress.
The planned weekend U.S. tariff expansion would extend punitive duties to
almost everything the U.S. buys from China. Beijing has threatened to retaliate
if the new tariffs go into effect.
Uncertainty over trade has been the biggest wildcard for stocks this year.
The longstanding conflict has hurt manufacturing around the world and caused
U.S. businesses to hold back on making investments. The saving grace for the
economy has been a strong job market and consumer spending.
Speculation that the world's two biggest economies could be close to
reaching an interim "Phase 1" trade agreement spurred investors on Thursday to
move money into technology, industrial and other stock sectors that tend to do
well when the economy is growing.
"If we get a China trade deal, it's probably going to catalyze another
12-plus months of growth in the U.S. and globally," Phillips said.
Banks helped lead the gains as bond prices fell, sending yields higher. Bank
of America rose 3.1%. Higher yields allow banks to charge more lucrative
interest rates on mortgages and other loans. The yield on the 10-year Treasury
jumped to 1.90% from 1.79% late Wednesday. That's an unusually large increase
and signals more confidence in economic growth.
Technology companies also made strong gains. The sector is one of the most
sensitive to swings in trade because many of the companies rely on China for
sales and supply chains. Cisco Systems climbed 3.1%.
Investors bid up shares in Delta Air Lines 2.9% after the most profitable
U.S. carrier gave investors a surprisingly good profit and revenue forecast for
2020. The company said it expects sustained demand for air travel and stable
prices for jet fuel.
Southwest Airlines gained 0.9% after it reached a deal with Boeing for
compensation over the grounding of the 737 Max aircraft.
Traders hammered shares in Tailored Brands after the owner of Men's
Wearhouse issued quarterly forecasts below what analysts were expecting. The
stock skidded 11.1% and is down 68.4% so far this year.
While investors continue to wait for an official word on a possible
U.S.-China trade deal, they'll get a look at new economic data Friday. The
Commerce Department is due to report its November snapshot of retail sales.
Economists expect retail sales rose last month. The measure gives more insight
into consumer spending, which has been among the brighter spots in the economy
helping to push growth.
Benchmark crude oil rose 42 cents to settle at $59.18 a barrel. Brent crude
oil, the international standard, gained 48 cents to close at $64.20 a barrel.
Wholesale gasoline was unchanged at $1.63 per gallon. Heating oil climbed 2
cents to $1.95 per gallon. Natural gas rose 9 cents to $2.33 per 1,000 cubic
Gold fell $2.70 to $1,466.70 per ounce, silver rose 11 cents to $16.85 per
ounce and copper rose 1 cent to $2.79 per pound.
The dollar rose to 109.34 Japanese yen from 108.51 yen on Wednesday. The
euro weakened to $1.1112 from $1.1140.
Major stock indexes in Europe closed broadly higher.