U.S. stocks rallied on Monday following temporary cease fire of trade-related conflict between the United States and China. U.S. U.S President Donald Trump and Chinese President Xi Jinping met for a dinner on the sidelines of the G-20 summit in Argentina on Dec 1, following which two countries agreed on a 90 day truce to solve bilateral trade-related issues. All three major stock indexes closed in the green.
The Dow Jones Industrial Average (DJI) closed at 25,826.43, gaining 1.1% or 287.97 points. The S&P 500 Index (INX) also increased 1.1% to close at 2,790.37. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,441.51, climbing 1.5%. A total of 8.4 billion shares were traded on Friday, higher than the last 20-session average of 7.6 billion shares. Advancers outnumbered decliners on the NYSE by 2.96-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.88-to-1 ratio. The CBOE VIX decreased 9% to close at 16.44.
How Did the Benchmarks Perform?
The Dow ended in positive territory for the second straight day. Notably, twenty two components of the 30-stock blue-chip index closed in the green while remaining eight finished the red. Meanwhile, the tech-heavy Nasdaq Composite also closed in the green for the second successive day due to strong gains of trade-sensitive large-cap stocks.
The S&P 500 also closed in the green for the second consecutive day, recording highest percentage gain on the first trading day of December since 2010. The Energy Select Sector SPDR (XLE) and Technology Select Sector SPDR (XLK) gained 2% each. The Consumer Discretionary Select Sector SPDR (XLY), Materials Select Sector SPDR (XLB) and Industrials Select Sector SPDR (XLI) increased 1.9%, 1.8% and 1.2%, respectively. Notably, ten out of total 11 sectors of the benchmark index closed in the green while only one finished in the red.
Trade Truce Between the United States and China
On Dec 1, the U.S. President Donald Trump and his Chinese counterpart Xi Jinping reached an initial agreement to permanently solve the eight month old trade-related conflicts between the two countries.
In a dinner meeting at G-20 summit in Argentina, both presidents agreed on certain mutually acceptable terms. Per the agreed terms, the United States will stay its decision to raise tariff rate from 10% to 25% on $200 billion Chinese goods. Meanwhile, China will substantially increase imports of agricultural, energy, industrial and other product from the United States to reduce current trade imbalance.
The truce will be valid for next 90 days during which the two countries will try to solve bilateral trade conflicts regarding technology transfer, intellectual property and agriculture. Moreover, neither side will levy any further tariff on the other during this period.
Consequently, shares of trade-sensitive Amazon.com Inc. (AMZN – Free Report) and Apple Inc. (AAPL – Free Report) surged 4.9% and 3.5%, respectively. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Institute of Supply Management’s U.S. manufacturing index for November came in at 59.6 compared with 57.7 in October and higher than the consensus estimate of 57.6. Notably, any reading above 50 indicates expansion for the whole manufacturing sector.
The Department of Commerce reported that U.S. construction spending for the month of October declined 0.1% to $1.31 trillion. The consensus estimate was for an increase of 0.3%. This was the third straight monthly decline. However, construction rose 4.9% year over year. Notably, September data was revised to a decline of 0.1% instead of remaining unchanged reported as earlier. Private construction spending dropped 0.4% in October compared with a 0.4% growth a September. Private residential spending plummeted 0.5%, its lowest since November 2017.
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