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Nasdaq, S&P 500 Reach New Record Closing Highs

wallstreet oct03 12dec19 lt

With traders expressing renewed optimism about a U.S.-China trade deal, stocks moved sharply higher over the course of the trading session on Thursday. The major averages fluctuated after an early rally, but the Nasdaq and the S&P 500 still ended the session at new record closing highs.

The major averages all finished the day firmly in positive territory. The Dow advanced 220.75 points or 0.8 percent to 28,132.05, the Nasdaq climbed 63.27 points or 0.7 percent to 8,717.32 and the S&P 500 jumped 26.94 points or 0.9 percent to 3,168.57.

The early rally on Wall Street came after President Donald Trump expressed optimism about a potential U.S.-China trade deal.

"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" Trump said in a post on Twitter just after the start of trading.

Trump has repeatedly expressed optimism about a trade deal but has previously suggested China wants to reach an agreement more than the U.S.

Stocks subsequently gave back some ground but moved back to the upside after reports said negotiators have agreed on the terms of a phase one trade deal that now requires Trump's approval.

The latest developments on the trade front come as Trump is meeting with top trade advisers today to discuss current plans to raise tariffs on $160 billion worth of Chinese goods on December 15th.

A report from Reuters said officials circulated talking points ahead of the meeting downplaying the repercussions the new tariffs would have on the U.S. economy.

Three sources familiar with the plans told Reuters the senior trade advisers are expected to present divergent views during the high-stakes meeting, with the final decision up to Trump.

Reports earlier this week suggested the U.S. would likely delay imposing the new tariffs to avoid agitating China amid an ongoing negotiations toward a phase one trade deal.

The news on the trade front largely overshadowed a report from the Labor Department showing initial jobless claims spiked to a two-year high in the week ended December 7th.

Michael Pearce, Senior U.S. Economist at Capital Economics, said the jump in jobless claims "most likely reflects seasonal adjustment problems around the Thanksgiving holiday rather than a genuine sudden deterioration in labor market conditions."

A separate Labor Department report showed U.S. producer prices came in unchanged in the month of November, as higher prices for goods offset lower prices for services.

Sector News

Energy stocks moved sharply higher over the course of the trading session, as positive signs regarding a potential U.S.-China trade deal boosted optimism about the outlook for demand.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index soared by 3.2 percent and 3.1 percent, respectively.

Substantial strength also emerged among banking stocks, as reflected by the 2.9 percent spike by the KBW Bank Index. The index ended the session at its best closing level in well over a year.

Computer hardware, semiconductor, networking, and steel stocks also saw considerable strength, while commercial real estate and tobacco stocks bucked the uptrend.

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 inched up by 0.1 percent, while China's Shanghai Composite Index jumped by 0.3 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.8 percent, the German DAX Index climbed by 0.6 percent and the French CAC 40 Index rose by 0.4 percent.

In the bond market, treasuries moved sharply lower over the course of the trading session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 10.7 basis points to 1.897 percent.

Looking Ahead

Developments on the trade front are likely to remain in focus on Friday, potentially overshadowing reports on retail sales, import and export prices and business inventories.

Earnings news from Adobe (ADBE), Broadcom (AVGO), Costco (COST) and Oracle (ORCL) may also attract attention, with the companies releasing their quarterly results after the close of today's trading.

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