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U.S. Stocks Close Roughly Flat After U.S., China Reach Trade Deal

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After ending the previous session notably higher, stocks turned in a relatively lackluster performance during trading on Friday. The major averages spent the day bouncing back and forth across the unchanged line before closing roughly flat.

While the tech-heavy Nasdaq rose 17.56 points or 0.2 percent to a new record closing high of 8,734.88, the Dow inched up 3.33 points or less than a tenth of a percent to 28,135.38 and the S&P 500 crept up 0.23 points or less than a tenth of a percent to 3,168.80.

For the week, the Nasdaq advanced by 0.9 percent, the S&P 500 climbed by 0.7 percent and the Dow rose by 0.4 percent.

The choppy trading on Wall Street came even though U.S. and Chinese officials announced a long-awaited agreement on a phase one trade deal.

Traders breathed a sigh of relief but seemed reluctant to make more significant moves amid a lack of clarity about the details of the agreement.

Optimism the U.S. and China would eventually reach an agreement has helped prop up the markets in recent months, and traders may be wary of pushing stocks higher now that the deal is finally almost finalized.

The agreement includes suspending planned tariffs on Chinese goods as well as scaling back existing tariffs in exchange for Chinese structural reforms and purchases of U.S. goods.

The announcement of the agreement comes just two days before a new 15 percent tariff on approximately $160 billion worth of Chinese goods was set to be imposed.

In addition to suspending the new tariffs, the U.S. agreed to cut the tariffs on approximately $120 billion worth of Chinese goods imposed on September 1st to 7.5 percent from 15 percent.

However, the office of U.S. Trade Representative Robert Lighthizer said a 25 percent tariff on approximately $250 billion worth of Chinese goods will remain in place.

Chinese officials suggested the existing tariffs would continue to be phased out, but that was not confirmed by the statement from the USTR.

In return for the lower tariffs, China has agreed to make structural reforms and other changes to its economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.

China has also committed to make substantial additional purchases of U.S. goods and services in the coming years, the USTR said.

U.S. and Chinese officials did not specify the dollar amount of purchases of U.S. goods, which was said to be one of the key sticking points in the negotiations.

President Donald Trump called the phase one deal an "amazing deal for all" and said negotiations on a phase two deal would be begin "immediately, rather than waiting until after the 2020 Election."

The phase one deal still needs to go through legal procedures as the U.S. and China move toward officially signing the agreement.

With the focus on trade news, traders largely shrugged off a report from the Commerce Department showing U.S. retail sales rose by much less than expected in the month of November.

The Commerce Department said retail sales edged up by 0.2 percent in November after climbing by an upwardly revised 0.4 percent in October.

Economists had expected retail sales to climb by 0.5 percent compared to the 0.3 percent increase originally reported for the previous month.

Excluding an increase in auto sales, retail sales inched up by 0.1 percent in November after rising by 0.3 percent in October. Economists had expected ex-auto sales to increase by 0.4 percent.

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the roughly flat close by the broader markets.

Natural gas stocks showed a substantial move to the downside, however, with the NYSE Arca Natural Gas Index tumbling by 1.8 percent.

The weakness in the sector came amid a decrease by the price of natural gas, as natural gas for January delivery fell $0.032 to $2.296 per million BTUs.

Networking, banking and steel stocks also saw some weakness on the day, while gold stocks moved higher along with the price of the precious metal.

With gold for February delivery climbing $8.90 to $1,481.20 an ounce, the NYSE Arca Gold Bugs Index rose by 1.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply higher during trading on Friday. Japan's Nikkei 225 Index soared by 2.6 percent, while China's Shanghai Composite Index surged up by 1.8 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index jumped by 1.1 percent, the French CAC 40 Index and the German DAX Index climbed by 0.6 percent and 0.5 percent, respectively.

In the bond market, treasuries rebounded strongly following the steep drop seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 7.8 basis points to 1.819 percent.

Looking Ahead

With the phase one trade deal finally nearing the finish line, next week's trading may be impacted by reaction to reports on homebuilder confidence, housing starts, industrial production, existing home sales and personal income and spending.

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