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


After initially showing a lack of direction, stocks have moved mostly higher over the course of morning trading on Monday. With the upward move, the major averages are adding to the substantial gains posted last Friday.

The major averages currently remain in positive territory. The Dow is up 98.84 points or 0.4 percent at 23,532.00, the Nasdaq is up 54.25 points or 0.8 percent at 6,793.10 and the S&P 500 is up 15.06 points or 0.6 percent at 2,547.00.

The strength that has emerged on Wall Street may reflect optimism about high-level trade talks between the U.S. and China in Beijing.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading the U.S. team at the two-day meeting, with a spokesman for China's Foreign Ministry predicting "positive and constructive discussions."

Meanwhile, traders have largely shrugged off a report from the Institute for Supply Management showing growth in U.S. service sector activity slowed by more than anticipated in the month of December.

The ISM said its non-manufacturing index dropped to 57.6 in December after inching up to 60.7 in November. While a reading above 50 still indicates service sector growth, economists had expected the index to dip to 59.0.

"The non-manufacturing sector's growth rate cooled off in December," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. "Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China."

Biotechnology stocks have shown a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 2.5 percent.

Loxo Oncology (LOXO) is leading the sector higher after the biopharmaceutical company agreed to be acquired by drug giant Eli Lilly (LLY) for $235 per share in cash or approximately $8 billion.

A sharp increase by the price of crude oil is also contributing to strength among energy stocks, which are moving significantly higher along with retail, networking, and housing stocks.

On the other hand, gold stocks are bucking the uptrend by the broader markets despite an increase by the price of the precious metal.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index skyrocketed by 2.4 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent.

Meanwhile, the major European markets have moved to the downside on the day. While the German DAX Index has fallen by 0.5 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index are down by 0.7 percent and 0.8 percent, respectively.

In the bond market, treasuries have pulled back near the unchanged line after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 2.664 percent.

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