Global Stock Rally Builds as US-China Trade Talks Wrap Up
Stocks closed higher on Wall Street, giving the market its first four-day winning streak since September and more in Wednesday’s Stock Market Update.
Technology companies and banks posted big gains Wednesday. Those stocks tend to benefit the most from economic growth.
Apple added 1.7 percent and Citigroup also rose 1.7 percent.
Energy companies benefited from the eighth straight gain in the price of oil.
Stocks stumbled in late trading after President Donald Trump cut short a meeting on ending the partial government shutdown, calling it a “waste of time.”
STOCK MARKET UPDATE
KEEPING SCORE: The S&P 500 rose 10 points, or 0.4 percent, to 2,584. The Dow Jones Industrial Average added 91 points, or 0.4 percent, to 23,879. The Nasdaq rose 60 points, or 0.9 percent, to 6,957.
The S&P 500 hasn’t had a four-day winning streak since mid-September.
WHAT THE FED SAID: During the Federal Reserve’s meeting in December, officials said volatile stock markets, trade tensions and uncertain global growth made their path for future interest rate hikes “less clear.” The Fed officials felt they could be “patient” about raising rates in the future.
Chairman Jerome Powell and other Fed officials have emphasized recently that they will take a careful approach to interest rates and the Fed’s gigantic but slowly-shrinking portfolio of government bonds. That’s been a relief to investors, who worried last fall that the Fed would raise rates too quickly and that their actions would hinder economic growth.
CHINA-US TRADE: The latest round of trade negotiations between the world’s two largest economic powers have now concluded, but investors were cheered when they learned the two-day talks would be extended by a day. No details were immediately announced.
The Trump administration wants the government of President Xi Jinping to alter its handling of technology and intellectual property held by foreign companies, and change plans for government-led creation of Chinese leaders in advanced technologies. Chinese officials have suggested they could revise some of their industrial plans but won’t abandon larger goals that they consider a path to prosperity and global influence.
TECH ON TOP: Chipmakers made some of the largest gains, as Micron Technology surged 5.6 percent to $35.93 and Broadcom climbed 3.7 percent to $244.77. The Philadelphia Semiconductor index sank 25 percent from early June to late December as investors worried about an abrupt slowdown in the global economy as well as the possibility that demand was falling and supplies were too large.
Other tech stocks also jumped. Microsoft gained 1.4 percent to $104.24 and Apple picked up 1.9 percent to $153.52.
GONNA NEED THAT DRINK: Beer and wine maker Constellation Brands slumped after it cut its annual profit forecast, saying it now expects sales and profits for its wine and spirits division to fall in the current fiscal year. The stock gave up 11.2 percent to $153.08.
The Corona maker also said it wrote down the value of its $4 billion investment in Canadian marijuana producer Canopy Growth by $164 million. Pot stocks proved popular in 2018 but have been extremely volatile. Many of them made big gains in 2018 as Canada legalized recreational marijuana, and drugmakers and consumer-focused companies like Constellation, Molson Coors and Altria struck partnerships with growers to develop products together.
Canopy stock rose in 2018 but has lost almost half its value since mid-October. On Wednesday it climbed 11.9 percent to $33.12.
ENERGY: Oil prices also continued to rally. U.S. crude rose 4.7 percent to $52.11 a barrel in New York and is trading at its highest in a month. Brent crude, used to price international oils, added 4.6 percent to $61.43 a barrel in London.
Crude oil is on track to rise for the eight day in a row and ninth in the last 10. U.S. crude has jumped 15 percent so far in 2019.
HOMEBUILDER BOUNCE: Lennar jumped 7.1 percent to $45.92 after CEO Stuart Miller said the company isn’t ready to give forecasts about its performance in 2019 because of “continued softness and uncertainty,” but said more potential buyers have been coming to its model homes recently as mortgage rates dipped.
That could be a sign sales will pick up. D.R. Horton leaped 5.7 percent to $39.38 and PulteGroup added 1.8 percent to $28.85. Many homebuilder stocks dropped 20 to 30 percent or more in 2018 as high prices and increasing mortgage rates hurt sales.
BONDS: Bond prices continued to fall. That sent yields higher, a sign investors expect more economic growth and higher long-term interest rates. The yield on the 10-year Treasury note rose to 2.72 percent from 2.71 percent.
Bond yields have climbed in the last few days, and that’s hurt stocks of slower growth, high-dividend companies including real estate investment trusts and utility operators. Those stocks are often compared to bonds because they make large, regular payments to shareholders, similar to the yields on bonds. The stocks often do well when investors are concerned about economic growth, but they often lag when growth looks solid and bond yields rise.
Pepsi fell 2.4 percent to $107.93 and Duke Energy lost 1.6 percent to $84.72. Digital Realty Trust sank 5.5 percent to $101.44 after a disappointing forecast.
METALS: Gold rose 0.5 percent to $1,292 an ounce. Silver inched up 0.1 percent to $15.74 an ounce and copper was unchanged at $2.66 a pound.
CURRENCIES: The dollar slipped to 108.14 yen from 108.65 yen. The euro climbed to $1.1541 from $1.1443.
OVERSEAS STOCK MARKET UPDATE: Indexes in Europe also rose. Germany’s DAX and the French CAC 40 each added 0.8 percent and Britain’s FTSE 100 gained 0.7 percent. Asian stocks made bigger gains. Japan’s Nikkei 225 gained 1.1 percent and the Hang Seng in Hong Kong rallied 2.3 percent. South Korea’s Kospi advanced 1.9 percent.
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