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Stocks Climbing To New Highs For The Session - U.S. Commentary


Stocks have moved notably higher over the course of the trading session on Monday, extending the rally seen last Friday. The major averages have climbed firmly into positive territory, with the tech-heavy Nasdaq leading the way higher.

In recent trading, the major averages have climbed to new highs for the session. The Dow is up 182.43 points or 0.8 percent at 23,615.59, the Nasdaq is up 99.50 points or 1.5 percent at 6,838.36 and the S&P 500 is up 27.09 points or 1.1 percent at 2,559.03.

The continued strength 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 beginning today, 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."

Last Thursday, the ISM released a separate report showing a notable slowdown in the pace of growth in U.S. manufacturing activity in December

The purchasing managers index tumbled to 54.1 in December after rising to 59.3 in November, hitting its lowest level since November of 2016. Economists had expected the index to slip to 57.9.

Sector News

Oil service stocks have moved sharply higher over the course of the session, resulting in a 4.2 percent spike by the Philadelphia Oil Service Index.

The rally by oil service stocks comes amid a notable increase by the price of crude oil, with crude for February delivery surging up $1.27 to $49.23 a barrel.

Considerable strength also remains visible among biotechnology stocks, as reflected by the 3.9 percent jump by the NYSE Arca Biotechnology Index.

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.

Natural gas, retail, housing and networking stocks are also seeing significant strength in mid-day trading, while gold and utilities stocks are bucking the uptrend.

Other Markets

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, European stocks climbed off their worst levels but still closed lower on the day. While the German DAX Index edged down by 0.2 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both fell by 0.4 percent.

In the bond market, treasuries have turned lower over the course of the session after seeing initial strength. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.3 basis points at 2.682 percent.

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