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Daily Market Update – Monday, May 14th

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U.S. stocks held on to slight gains in late-afternoon trading Monday following a pullback from an early rally driven by investor speculation that the U.S. and China are making progress on trade. Health care and energy companies accounted for much of the market’s gain. Casino operators and equipment companies got a boost from a Supreme Court decision that cleared the way for states to legalize sports betting.

KEEPING SCORE: The S&P 500 index added 2 points, or 0.1 percent, to 2,730 as of 3:08 p.m. Eastern Time. The Dow Jones industrial average climbed 72 points, or 0.3 percent, to 24,903. The Nasdaq composite rose 12 points, or 0.2 percent, to 7,415. The Russell 2000 index of smaller-company stocks lost its early gains, sliding 4 points, or 0.3 percent, to 1,602. The stock market is coming off its best weekly gain since early March.

U.S.-CHINA TRADE: Investors hoped for reduced trade tensions between the U.S. and China Monday after President Donald Trump tweeted over the weekend that he would help Chinese telecommunications company ZTE get “back into business” despite U.S. sanctions, saying too many jobs in China are at stake after the U.S. government cut off access to ZTE’s American suppliers. ZTE’s Hong Kong-traded shares have been suspended since U.S. authorities banned it last month for seven years from importing U.S. components in a case involving illegal exports to North Korea and Iran. China’s foreign ministry responded by saying it “highly commended” the move, ahead of trade talks in Washington this week.

U.S. companies that would stand to benefit from an effort to rescue ZTE moved higher. Acacia Communications jumped 8.5 percent to $34.18, while Oclaro gained 4 percent to $8.91.

THE QUOTE: The president’s tweet about ZTE is a sign that U.S.-China trade negotiations are relatively constructive, if not friendly, said Brian Nick, chief investment strategist at Nuveen Asset Management.

“If you have concessions being made like that on one or both sides it probably means that the worst-case outcome is less likely, which would be a good thing for stocks,” Nick said. “In general the market probably overreacted to the trade-related noise that started popping up around March 1. There was this sense that we might get this worst-case-scenario trade war and that seemed to be priced in relatively quickly, and we’re starting to see it priced out of equity valuations now.”

WAITING ON CHINA: Qualcomm and NXP Semiconductors got a boost as investors hope that Chinese regulators will reverse their stance and approve Qualcomm’s proposed $44 billion acquisition of NXP. China is the final major government withholding approval of the deal. But Bloomberg News reported that Chinese regulators are reviewing the deal again.

Qualcomm rose 3.2 percent to $56.99, while NXP surged 12.9 percent to $111.82.

TUNED OUT: Viacom tumbled 6.9 percent to $28.13 after CBS sued its controlling shareholder, seeking to block efforts to make the company combine with Viacom. CBS added 3 percent to $54.12.

BET ON THIS: Casino operators and equipment makers surged after the Supreme Court struck down a federal law that barred gambling on football, basketball and other sporting events in most states. The ruling gives states the go-ahead to legalize sports betting. Penn National Gaming rose 4.3 percent to $33.64, while Empire Resorts jumped 13.4 percent to $22.05. Scientific Gaming, which makes casino and interactive games as well as lottery games, vaulted 12.2 percent to $59.85.

NO DEAL: Xerox slid 5.5 percent to $28.50 after the copier maker ended merger talks with Fujifilm and resolved a dispute with investors Carl Icahn and Darwin Deason.

OH SO HEALTHY: Investors continued to bid up shares in health care companies. CVS Health gained 3.7 percent to $66.79.

ENERGY: Benchmark U.S. crude oil rose 26 cents to settle at $70.96 a barrel in New York. Brent crude, used to price international oils, gained $1.11, or 1.4 percent, to $78.23 a barrel in London.

Rising oil prices helped lift energy stocks. Range Resources added 2.6 percent to $14.66.

BOND YIELDS: Bond prices fell. The yield on the 10-year Treasury rose to 2.99 percent from 2.97 percent late Friday.

CURRENCIES: The dollar rose to 109.62 yen from 109.30 yen on Friday. The euro strengthened to $1.1947 from $1.1945.

METALS: Gold fell $2.50 to $1,318.20 an ounce. Silver dropped 11 cents to $16.65 an ounce. Copper slipped 2 cents to $3.09 a pound.

MARKETS OVERSEAS: Major stock indexes in Europe declined. Germany’s DAX lost 0.2 percent, while France’s CAC 40 dipped 0.02 percent. Britain’s FTSE 100 edged 0.2 percent lower. In Asia, Japan’s benchmark Nikkei 225 closed 0.5 percent higher. South Korea’s Kospi dipped 0.1 percent. Hong Kong’s Hang Seng jumped 1.4 percent.

 

© The Associated Press. All rights reserved.

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