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MARKET SNAPSHOT: Stocks Extend Gains As U.S.-China Trade Optimism Persists

13/02/2019 6:18pm

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By Chris Matthews and Barbara Kollmeyer, MarketWatch

Oil prices climb after Saudi oil minister says country will cut oil production further

U.S. stocks were on the rise Wednesday afternoon, though off session highs, after President Donald Trump said he may let a China trade-deal deadline "slide" if the two sides were making enough progress.

How are major indexes faring?

The Dow Jones Industrial Average rose 83 points, or 0.3%, to 25,512, while the S&P 500 index rose 7 points, or 0.3%, to 2,752.

Read: Morgan Stanley warns of a looming earnings recession (http://www.marketwatch.com/story/stock-market-may-be-in-for-a-rude-awakening-as-profits-dry-up-warns-strategist-2019-02-11)

The Nasdaq Composite climbed 15 points, or 0.2%, to 7,430. A finish above 7,431.50 would mark the end of a bear market for the tech-heavy index that began on Dec. 21.

At session highs Wednesday morning, the Dow was up 200 points, the S&P had risen 17 points, while the Nasdaq climbed as high 47 points above its opening levels.

See:The Nasdaq is on pace to end its longest stint from a bear-market low to exit in nearly 30 years (http://www.marketwatch.com/story/the-nasdaq-is-on-pace-to-end-its-longest-bear-market-in-nearly-30-years-2019-02-13)

What's driving the market?

Trump said Tuesday that he would allow for flexibility on the timeline for a deal with China if an agreement (http://www.marketwatch.com/story/trump-says-he-may-hold-off-on-raising-tariffs-if-deal-with-china-seems-close-2019-02-12) looks close. Meanwhile, Chinese President Xi Jinping is expected to meet key members of the U.S. delegation on Friday, the South China Morning Post (https://www.scmp.com/economy/china-economy/article/2185928/china-president-xi-jinping-meet-top-us-delegation-friday) reported, citing sources.

A third day of bilateral trade negotiations were under way in Beijing, with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer expected Thursday for more high-level discussions. The White House had previously referred to its stop points as a "hard deadline." A 90-day trade truce ends on March 1, and tariffs on some $200 billion in goods had been set to be raised to 10% from 25% at 12:01 a.m. Eastern time March 2.

Read:For the stock market, a trade-war win may be a hollow victory (http://www.marketwatch.com/story/for-the-stock-market-a-trade-war-win-may-be-a-hollow-victory-2019-02-12)

Meanwhile, Trump said Tuesday a second government shutdown was unlikely (http://www.marketwatch.com/story/trump-today-president-critical-of-border-deal-but-doesnt-say-hell-reject-it-2019-02-12), even as he expressed unhappiness with a tentative agreement that allows for 55 miles of new border fencing reached by Democratic and Republican lawmakers late Monday (http://www.marketwatch.com/story/lawmakers-reach-border-security-deal-that-would-avert-shutdown-2019-02-11).

Which data and Fed speakers are in focus?

Consumer prices were unchanged in January compared with the month before (http://www.marketwatch.com/story/inflation-flatlines-in-january-thanks-to-lower-gas-prices-cpi-shows-2019-02-13), the Bureau of Labor Statistics announced Wednesday morning, below the 0.1% increase in prices expected by economists per a MarketWatch poll.

The year-over-year growth in prices as measured by the consumer-price index fell in January to 1.6%, from a rate of nearly 3% seen in July, a trend that has helped support the argument that the Federal Reserve doesn't need to aggressively raise interest rates this year.

Atlanta Federal Reserve President Raphael Bostic said in a moderated discussion at the European Financial Forum Tuesday morning that he is predicting the Fed will raise rates one time in 2019.

Cleveland Fed President Loretta Mester told an audience in Lexington, Kentucky Wednesday morning that she doesn't have an economic recession in her forecast, nor does she the U.S. in the midst of a housing bubble.

Philadelphia Fed President Patrick Harker also endorsed a single rate increase in 2019 (http://www.marketwatch.com/story/feds-harker-one-interest-rate-hike-in-2019-and-another-in-2020-will-be-appropriate-2019-02-13), while predicting a another hike would be appropriate in 2020, during a speech Wednesday to the Jewish Business Network luncheon.

Bostic, Mester and Harker aren't voting members of the rate-setting Federal Open Market Committee in 2019.

At 2 p.m., investors will learn the size of the federal budget deficit in December.

What are the analysts saying?

"Developments that show progress on U.S-China trade have proven enough to sustain positive momentum," Eric Weigand, senior portfolio manager at U.S. Bank Wealth Management, told MarketWatch.

"Its possible to sustain this momentum, as we still see factors in the backdrop that remain fertile like modest inflation, continued economic growth, and a healthy consumer. What we're most concerned about is whether earnings growth can be sustained. That's the real issue over the intermediate term," he said.

"Market participants are likely to keep their gaze locked on the U.S.-China trade sequel, with top-level negotiations scheduled for Thursday and Friday," wrote Charalambos Pissouros, senior market analyst with JFD Brokers.

Xi's planned meeting with U.S. negotiators "adds to signs that the two nations are willing to work things out. In our view, further positive remarks are likely to keep market sentiment supported, but for a sustained recovery in risk assets, like equities, we would like to see signatures," Pissouros said.

What stocks are worth watching?

Shares of Dish Network Corp. (DISH) fell 8.7% after the satellite TV company reported fourth-quarter earnings that fell short (http://www.marketwatch.com/story/dish-networks-stock-drops-after-earnings-subscriber-numbers-miss-expectations-2019-02-13) of Wall Street expectations, while reporting the number of its pay-TV subscribers fell more than forecast.

Activision Blizzard Inc. (ATVI) shares were up 4.2% after the company reported fiscal fourth-quarter Tuesday evening, while also announcing a restructuring plan (http://www.marketwatch.com/story/activision-blizzard-says-layoffs-are-effort-to-focus-on-core-games-as-earnings-forecast-disappoint-2019-02-12) that includes reducing its staff by 8%.

Though the company missed quarterly earnings and profit forecasts, investors have bid up the stock on optimism toward management plans for cost cutting and a pledge to increase its dividend by 9%.

Shares of Hilton Worldwide Holdings Inc. (HLT) rose 5.9% after the hotel operator announced a fourth-quarter adjusted profit (http://www.marketwatch.com/story/hilton-beats-profit-and-revenue-expectations-provides-upbeat-outlook-2019-02-13) and revenue that rose above expectations and provided an upbeat earnings outlook.

Interpublic Group of Cos. (IPG) stock was up 3.6% after the advertising giant announced it would raise its quarterly divided 2% to $23.50 per share.

Shares of TripAdvisor Inc. (TRIP) were down 6.5%, after the company released a Tuesday evening earnings report that fell short of analyst expectations (http://www.marketwatch.com/story/tripadvisor-misses-on-earnings-2019-02-12).

Johnson & Johnson(JNJ) shares were falling 0.3%, after the firm announced subsidiary Ethicon Inc. agreed to acquire surgical robotics company Auris Health, Inc. for approximately $3.4 billion in cash.

How did the major benchmarks trade yesterday?

Major indexes closed at 2019 highs on Tuesday (http://www.marketwatch.com/story/us-stock-futures-climb-as-lawmakers-reach-tentative-shutdown-deal-2019-02-12), with the Dow Jones Industrial Average climbing 372.65 points, or 1.5%, to 25,425.76, while the S&P 500 rose 1.3% to 2,744.73, finishing above its 200-day moving average for the first time in 46 days. That marked the S&P's longest sojourn under the key trend line since March 2016, according to the Dow Jones Market Data Group.

The Nasdaq Composite Index advanced 1.5% to 7,414.62.

How were other markets trading?

Trade-deal optimism and a strong session for Wall Street on Tuesday inspired gains across global markets. In Asia, the Nikkei 225 (http://www.marketwatch.com/story/asian-markets-mostly-higher-boosted-by-energy-stocks-2019-02-12) index jumped 1.3% and the Shanghai Composite rose nearly 2%.

In Europe, stocks closed higher (http://www.marketwatch.com/story/european-stocks-toast-strong-earnings-trade-optimism-2019-02-13), with the Stoxx Europe 600 advancing, along with the United Kingdom's FTSE 100 .

Crude prices were rising 2.1% after Saudi Arabia's Energy Minister Khalid al-Falih told the Financial Times in an interview (https://www.ft.com/content/e0a6775c-2e4f-11e9-ba00-0251022932c8) that the country would further reduce its oil production, to near 9.8 billion barrels a day in March.

Read:Is there a 'Saudi put' on oil prices? Here's one analyst's argument (http://www.marketwatch.com/story/a-fed-put-for-stocks-heres-a-saudi-put-for-oil-prices-2019-02-01)

Gold was also on the rise (http://www.marketwatch.com/story/gold-slips-as-steps-toward-us-china-trade-pact-cut-demand-for-haven-assets-2019-02-13), while the U.S. dollar was advancing against its peers (http://www.marketwatch.com/story/dollar-inches-higher-ahead-of-us-inflation-data-for-january-2019-02-13).

 

(END) Dow Jones Newswires

February 13, 2019 13:03 ET (18:03 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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