Wall Street witnessed choppy trading Monday as investors weighed the likely outcome of the latest round of trade talk between the United States and China. Moreover, market participants are waiting for fresh dose of stimulus from major central banks expected to be announced later this month. The Dow ended in positive territory while the Nasdaq Composite finished in the red. Meanwhile, the S&P 500 lost marginally on Monday.
The Dow Jones Industrial Average (DJI) climbed 0.2% to close at 26,835.51. However, the S&P 500 lost 0.28 points to close at 2,978.43. The Nasdaq Composite Index closed at 8,087.44, dropping 0.2%. The fear-gauge CBOE Volatility Index (VIX) increased 1.8% to close at 15.27. A total of 7.42 billion shares were traded on Monday, higher than the last 20-session average of 6.77 billion. Advancers outnumbered advancers on the NYSE by a 1.49-to-1 ratio. On Nasdaq, a 1.51-to-1 ratio favored advancing issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory for fourth consecutive days with 16 components of the 30-stock index closing in the green while the remaining 14 ended in red. This marked the index’s largest winning streak since the week ended Jul 15. The blue-chip index’s gain was mainly boosted by a 3.7% jump in shares of Caterpillar Inc. (CAT – Free Report) with a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 closed marginally below the break-even level. The Energy Select Sector SPDR (XLE) and Financials Select Sector SPDR (XLF) soared 2% and 1.5%, respectively. Notably, six out of total 11 sectors of the benchmark index closed in the red while five finished in red. The Nasdaq Composite continued its losing streak for successive days due to poor performance of tech stocks.
Positive Development on Trade War Front
As per POLITICO, China has expressed desire to increase imports of U.S. agricultural if the U.S. government eases up business restrictions imposed on the Asian telecom behemoth Huawei Technologies and postpone escalation of tariff rate on $250 billion of Chinese goods effective Oct 1. Per the newspaper, the Trump administration is also evaluating the latest round of trade negotiations in order to consider delaying imposing 15% tariff on around $160 billion of Chinese goods effective Dec 15.
Meanwhile, the U.S. Treasury Secretary Steven Mnuchin said both the United States and China reached a “conceptual agreement” on enforcement mechanisms related to intellectual property theft. Notably, disputes regarding proper utilization of intellectual properties are major source of conflict between the two largest trading nations of the world.
Market Expects More Stimulus from Major Central Banks
First, despite an expanding U.S. economy, the Wall Street has assigned a high chance for the Fed to reduce the benchmark leading rate again in September after doing the same in July, for the first time in 11 years. On Sep 6, Fed Chair Jerome Powell once again reiterated his pledge that the central bank will do whatever is needed to sustain U.S. economic expansion.
Likewise, the market is expecting further rate cut by the European Central Bank (ECB). Moreover, the central bank can also resume bond buy process, which it abandoned in December 2018, in order to generate liquidity in the economy.
Moreover, China’s exports fell 1 % in August due to lingering trade war with the United Sates. China’s central bank is exploring several initiatives to strengthen the economy. The latest being the reduction of cash reserve ratio of the commercial bank to inject fresh cash in the system.
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