Wall Street closed sharply higher on Friday after President Trump said that United States reached first phase of trade deal with China. The news boosted investors’ confidence on risky assets like equities. All three major stock indexes ended in the green. For the week as a whole, these stock indexes finished in positive territory.
The Dow Jones Industrial Average (DJI) surged 1.2% or 319.92 points to close at 26,816.59. The S&P 500 climbed 1.1% to close at 2,970.27. Meanwhile, the Nasdaq Composite Index closed at 8,057.04, jumping 1.3%. The fear-gauge CBOE Volatility Index (VIX) decreased 11.3% to close at 15.58. A total of 7.55 billion shares were traded on Friday, higher than the last 20-session average of 7 billion. Advancers outnumbered decliners on the NYSE by a 3.14-to-1 ratio. On Nasdaq, a 3.08-to-1 ratio favored advancing issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory with 26 components of the 30-stock blue-chip index closing in the green while 4 ended in red and 1 remained unchanged. The S&P 500 also ended in the green. Both the Industrials Select Sector SPDR (XLI) and Materials Select Sector SPDR (XLB) gained 1.9%. Notably, eight out of total 11 sectors of the benchmark index closed in the green while three finished in red. The Nasdaq Composite finished in the green due to strong performance of large-cap stocks.
Partial Trade Deal in the Offing
According to President Trump, the first phase of the deal will address issues related to safeguarding of U.S. intellectual property rights, including force transfer or theft of technologies, reform of the Chinese financial markets and China’s practice of arbitrarily setting foreign-exchange rate. Moreover, China has agreed to purchase $40-$50 billion worth U.S. agricultural products.
The U.S. government has decided to scrap its decision to raise tariff rates from 25% to 30% on $250 billon Chinese goods, mostly used as intermediaries for high-tech U.S. products, effective Oct 15. Also, no decision has been taken on the planned new set of 15% tariff on $160 billion Chinese exports, effective Dec 15.
President Trump said that the first phase of the deal will be signed within the next three weeks and the second phase will start almost immediately after the completion of the first part.
Consequently, shares of trade-sensitive stocks like Caterpillar Inc. (CAT – Free Report) , Deere & Co. (DE – Free Report) and Apple Inc. (AAPL – Free Report) surged 4.7%, 1.9% and 2.7%, respectively. Deere & Co. carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Federal Reserve announced that it will purchase Treasury Bills worth $60 billion per month starting from next week in order to ensure enough liquidity and ample reserve in the banking system. The quantitative easing process will continue at least up to the first half of the next year.
University of Michigan reported that its preliminary index of consumer sentiment for the month of October came in at 96%.
Meanwhile, the U.S. import price index rose for the first time in four month in September by 0.2% primarily owing higher oil prices.
Wall Street has reversed its two-weeks of losing streak last week. All three major stock indexes —- the Dow, the S&P 500 and the Nasdaq Composite —- 0.9%, 0.6% and 0.9%, respectively. Positive development on trade war front is the primary reason for stock market rally last week.
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