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Stocks Move Sharply Higher On Optimism About Trade Talks - U.S. Commentary

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After initially showing a lack of direction, stocks moved sharply higher over the course of the trading session on Thursday. With the gains on the day, the major averages extended the strong upward move seen over the two previous sessions.

The major averages ended the day just off their highs of the session. The Dow surged up 264.98 points or 1.1 percent to 25,380.74, the Nasdaq soared 128.16 points or 1.8 percent to 7,434.06 and the S&P 500 jumped 28.63 points or 1.1 percent to 2,740.37.

The continued strength on Wall Street came after President Donald Trump said he had a "very good" conversation with Chinese President Xi Jinping about trade.

"Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade," Trump said in a post on Twitter.

"Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina," he added. "Also had good discussion on North Korea!"

The tweet from Trump comes following recent reports the U.S. will impose tariffs on all remaining Chinese imports if the talks on the sidelines of the G20 summit fail to ease the trade war.

On the U.S. economic front, the Labor Department released a report showing a slight drop in first-time claims for U.S. unemployment benefits in the week ended October 27th.

The report said initial jobless claims edged down to 214,000, a decrease of 2,000 from the previous week's revised level of 216,000.

Economists had expected jobless claims to come in unchanged compared to the 215,000 originally reported for the previous week.

A separate report from the Labor Department showed a slowdown in the pace of labor productivity growth in the third quarter.

The Labor Department said labor productivity climbed by 2.2 percent in the third quarter after jumping by 3.0 percent in the second quarter. Economists had expected productivity to increase by about 2.0 percent.

Meanwhile, the report said unit labor costs surged up by 1.2 percent in the third quarter after slumping by 1.0 percent in the second quarter. The rebound in labor costs matched economist estimates.

The Institute for Supply Management also released a report showing a bigger than expected slowdown in the pace of growth in manufacturing activity in the month of October.

The ISM said its purchasing managers index dropped to 57.7 in October from 59.8 in September, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to edge down to 59.0.

With the much bigger than expected decrease, the manufacturing index fell to its lowest level since hitting 57.3 in April.

Sector News

Biotechnology stocks moved sharply higher over the course of the trading session, driving the NYSE Arca Biotechnology Index up by 5 percent.

Celgene (CELG), Regeneron Pharmaceuticals (REGN), and Biogen (BIIB) turned in some of the biotech sector's best performances on the day.

Substantial strength was also visible among gold stocks, as reflected by the 4.8 percent spike by the NYSE Arca Gold Bugs Index.

The rally among gold stocks came amid a sharp increase by the price of the precious metal, with gold for December delivery soaring $23.60 to $1,238.60 an ounce.

Semiconductor stocks also saw significant, resulting in a 4.6 percent jump by the Philadelphia Semiconductor Index. The index continued to recover after ending Monday's trading at its lowest closing level in well over a year.

Computer hardware, chemical, housing, and retail stocks also moved notably higher, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index slumped by 1.1 percent, while Hong Kong's Hang Seng Index spiked by 1.8 percent.

The major European markets also ended the day mixed. While the German DAX Index rose by 0.2 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index both dipped by 0.2 percent.

In the bond market, treasuries regained ground after moving notably lower over the past few sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.5 basis points at 3.144 percent.

Looking Ahead

The Labor Department's closely watched monthly employment report is likely to be in the spotlight on Friday, overshadowing separate reports on the U.S. trade deficit and factory orders.

Employment is expected to climb by 190,000 jobs in October after rising by 134,000 jobs in September, while the unemployment rate is expected to hold at 3.7 percent.

On the earnings front, tech giant Apple (AAPL) is among the companies releasing their quarterly results after the close of today's trading along with CBS Corp. (CBS), GoPro (GPRO), MetLife (MET), and Starbucks (SBUX).

Energy giants Exxon Mobil (XOM) and Chevron (CVX) are also among the companies due to report their quarterly results before the start of trading on Friday.

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