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Optimism About Trade Talks Leads To Strength On Wall Street - U.S. Commentary

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Following the mixed performance seen in the previous session, stocks moved mostly higher over the course of the trading day on Friday. The upward move lifted the Dow and the Nasdaq to their best closing levels in three months and the S&P 500 reached a two-month closing high.

The major averages all closed firmly positive, although the Dow outperformed its counterparts. The Dow soared 443.86 points or 1.7 percent to 25,883.25, the Nasdaq climbed 45.46 points or 0.6 percent to 7,472.41 and the S&P 500 jumped 29.87 points or 1.1 percent to 2,775.60.

With the advance on the day, the major averages all moved higher for the week. The Dow spiked by 3.1 percent, while the Nasdaq and the S&P 500 shot up by 2.4 percent and 2.5 percent, respectively.

The strength on Wall Street came amid continued optimism about trade talks between the U.S. and China, the world's two largest economies.

A statement from the White House said high level U.S.-China trade talks this week led to "progress between the two parties" but noted "much work remains."

The White House said the U.S. hopes to see additional progress as discussions at the ministerial and vice-ministerial levels continue in Washington next week.

Traders also reacted positively to news that lawmakers and President Donald Trump managed to avoid another government shutdown.

Trump still decided to declare a national emergency to obtain additional funds for his controversial border wall, although the move is not likely to have an immediate impact as it will face significant legal challenges.

Optimism about the economic outlook was also generated by preliminary data from the University of Michigan showing a bigger than expected rebound in consumer sentiment in the month of February.

The report said the consumer sentiment index climbed to 95.5 in February after tumbling to 91.2 in January. Economists had expected the index to rise to 93.0.

Surveys of Consumers chief economist Richard Curtin said the rebound in consumer sentiment reflected the end of the partial government shutdown as well as a more fundamental shift in consumer expectations due to the Federal Reserve's pause in raising interest rates.

Meanwhile, traders largely shrugged off a report from the Federal Reserve showing an unexpected decrease in industrial production in January.

The Fed said industrial production fell by 0.6 percent in January after inching up by a downwardly revised 0.1 percent in December.

Economists had expected production to tick up by 0.1 percent compared to the 0.3 percent increase originally reported for the previous month.

The unexpected drop in industrial production came as manufacturing output slumped by 0.9 percent in January after climbing by 0.8 percent in December.

Sector News

Telecom stocks moved sharply higher over the course of the trading session, driving the NYSE Arca North American Telecom Index up by 2.6 percent. With the jump, the index ended the session at its best closing level in over two months.

Significant strength among emerged among energy stocks, which moved to the upside along with the price of crude oil. Crude for March delivery surged up $1.18 to $55.59 a barrel, continuing to react to news of cuts in production.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index spiked by 2.6 percent, the NYSE Arca Natural Gas Index shot up by 2.4 percent and the NYSE Arca Oil Index advanced by 1.6 percent.

Banking stocks also saw considerable strength on the day, with the KBW Bank Index skyrocketing by 2.4 percent to a two-month closing high.

Networking, brokerage, biotechnology, and healthcare stocks also moved notably higher amid broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index slumped by 1.1 percent, while Hong Kong's Hang Seng Index plunged by 1.9 percent.

Meanwhile, European stocks showed strong moves to the upside on the day. While the U.K.'s FTSE 100 Index climbed by 0.6 percent, the French CAC 40 Index and the German DAX Index surged up by 1.8 percent and 1.9 percent, respectively.

In the bond market, treasuries gave ground following the notable upward move seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by nearly a basis point to 2.666 percent.

Looking Ahead

Following the holiday weekend, next week's trading may be impacted by reaction to reports on homebuilder confidence, durable goods orders and existing home sales.

Traders are also likely to keep an eye on earnings news from companies like Walmart (WMT), Medtronic (MDT), CVS Health (CVS), Domino's Pizza (DPZ), Wendy's (WEN), and Intuit (INTU).

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