Trade Optimism Sends US Stocks Higher 06/18 15:53
Potentially encouraging news on trade and interest rates put Wall Street in
a buying mood Tuesday, driving the market to solid gains and sending the Dow
Jones Industrial Average 350 points higher.
(AP) -- Potentially encouraging news on trade and interest rates put Wall
Street in a buying mood Tuesday, driving the market to solid gains and sending
the Dow Jones Industrial Average 350 points higher.
Technology stocks powered much of the rally as investors welcomed news that
the leaders of the U.S. and China will meet face-to-face next week to discuss
their long-running trade dispute. Traders have been hoping for any positive
sign in the trade war between the world's largest economies.
It's not the first time the market has rallied on seemingly encouraging
developments on trade. Previous positive signs did not pan out, triggering
"You sort of have to ignore it a little bit," said Tobias Carlisle, founder
and portfolio manager at Acquirers Funds. "It's probably going to drag out to
the end of the year, so what we're trying to do is buy something undervalued,
and it's great when there's a day like today and it works."
Markets also got a boost after the head of the European Central Bank said it
was ready to cut interest rates and provide additional economic stimulus if
necessary. The remarks put the spotlight on the Federal Reserve, which is set
to announce its own decision on interest rates Wednesday.
The S&P 500 index climbed 28.08 points, or 1% to 2,917.75. The Dow gained
353.01 points, or 1.4%, to 26,465.54. The Nasdaq, which is heavily weighted
with technology companies, jumped 108.86 points, or 1.4%, to 7,953.88.
The Russell 2000 index of smaller companies added 17.48 points, or 1.1%, to
It was the second straight gain for the market, extending a strong rebound
for stocks in June after a steep sell-off last month.
The benchmark S&P 500 is now less than 1% below its all-time high set on
April 30. The Dow is 1.4% below its record high set October 3. The Nasdaq is
about 2.5% below its record close set on May 3.
The wave of buying got its start overseas early Tuesday after the remarks
from the head of the ECB. Major indexes in Europe closed sharply higher.
President Donald Trump stirred fresh optimism among investors when he said
he will hold talks with Chinese President Xi Jinping at an international summit
in Japan. U.S. businesses have implored Trump to stop escalating the trade war
and refrain from expanding his tariffs to $300 billion on goods from China.
A prospective meeting between the U.S. and China's leaders is welcome news
for a market that has been searching for some direction. "If you think back a
week ago, there was a fear they wouldn't even talk at all," said J.J. Kinahan,
chief market strategist at TD Ameritrade.
Investors were also looking ahead to the Federal Reserve's next interest
rate policy announcement Wednesday, with many betting the central bank is
headed for its first interest rate cut in over a decade.
Two weeks ago, Fed Chair Jerome Powell set off a rally on Wall Street after
he signaled that the central bank is willing to cut interest rates to help
stabilize the economy if the trade war between Washington and Beijing starts to
crimp growth. Any continued escalations could put the brakes on what is poised
to be the longest economic expansion in U.S. history.
Most analysts say they think economic growth has slowed sharply in the
April-June quarter to around a 1.5% percent annual rate, only half the pace of
the past year.
Investors collectively envision a Fed rate cut by July and possibly further
cuts after that. Some are even betting on a rate cut this week. Many
economists, though, think the Fed will wait until September at the earliest to
announce its first drop in its benchmark short-term interest rate since 2008
and might not cut again in 2019. A few Fed watchers foresee no rate cut at all
"I don't know that the Fed is going to deliver what investors want because
the market looks fairly frothy at the moment," Carlisle said.
Technology sector stocks powered much of the rally Tuesday. Apple gained
2.4% and chipmakers Intel and Nvidia rose 2.7% and 5.4%, respectively. Google's
parent company, Alphabet added 1%.
Banks rose. JPMorgan Chase picked up 1.4% and Bank of America rose 2.5%.
Industrial and consumer-related stocks also made big gains. General Electric
climbed 3.7%, Caterpillar rose 2.4%, and Nike added 2.7%.
Utilities and consumer products companies ended lower, a sign that investors
were stepping back from the safe-play sectors and taking on more risk.
SM Energy climbed 6.6% after the oil and natural gas company raised
production forecasts for the second quarter and full year.
U.S. government bond prices rose, sending yields lower. The yield on the
10-year Treasury note fell to 2.06%, below the 2.08% it traded at late Monday.
That's still well below the 2.21% yield on the three-month Treasury bill.
Benchmark crude oil rose 3.8% to settle at $53.90 a barrel. Brent crude oil,
the international standard, rose 2% to close at $62.14 a barrel. Wholesale
gasoline rose 1.8% to $1.72 per gallon. Heating oil climbed 1.6% to $1.83 per
gallon. Natural gas fell 2.4% to $2.33 per 1,000 cubic feet.
Gold edged down 0.6% to $1,350.70 per ounce, silver rose 1.1% to $14.99 per
ounce and copper rose 2.1% to $2.70 per pound.
The dollar fell to 108.44 Japanese yen from 108.57 yen on Friday. The euro
weakened to $1.1196 from $1.1216.