U.S. Stocks Gain, Erasing Earlier Decline
15 May 2019 - 6:01PM
Dow Jones News
By Amrith Ramkumar and Paul J. Davies
U.S. stocks climbed Wednesday, advancing for the second
consecutive session on hopes that thawing trade tensions will boost
the outlook for the world economy.
The Dow Jones Industrial Average was recently up 122 points, or
0.5%, at 25654. The S&P 500 added 0.6%, moving 3.2% below its
April 30 record. It remains up 14% for the year. The tech-laden
Nasdaq Composite added 1%.
Stocks erased earlier declines after Treasury Secretary Steven
Mnuchin said U.S. negotiators are likely to travel to Beijing soon
and reports emerged that the Trump administration is putting off a
final decision on whether to impose broad tariffs on automobile and
auto-part imports.
Updates on global trade policy have swung markets in recent
days, with stocks rising and falling on shifting bets about the
U.S. and China eventually reaching an agreement. Many investors are
broadly worried about higher tariffs crimping economic and profit
growth, leading to an uptick in volatility so far this month.
Those jitters have also increased focus on economic data points
as analysts attempt to gauge whether a growth slowdown overseas
will spread to the U.S. Data Wednesday showed U.S. retail sales
fell unexpectedly in April even before the U.S. raised tariffs on
$200 billion worth of Chinese imports and Beijing said it would
raise levies on $60 billion of U.S. goods in response. U.S.
manufacturing output also fell in April, missing expectations.
Figures also showed Chinese industrial production, retail sales
and fixed-asset investment all slowed in April, the latest mixed
data point concerning analysts who are uncertain how much stimulus
measures will spur activity in the world's second-largest
economy.
"There is more of a sluggish growth environment in the cards,"
said Matt Miskin, market strategist at John Hancock Investments.
"It looks like an inopportune time to have more trade-war headlines
creep into the markets."
In one sign of heightened growth worries, bond yields slid with
investors seeking safety in U.S. Treasurys. The yield on the
benchmark 10-year U.S. Treasury note fell to 2.386%, according to
Tradeweb, from 2.421% a day earlier. Bond yields fall as prices
rise.
"Bonds and cash are the beloved asset classes right now," Mr.
Miskin said. "That leaves equities in a position where they could
have upside just because sentiment has come down."
Some analysts expect an eventual trade deal and Chinese stimulus
measures to boost the outlook for global growth moving forward. The
Shanghai Composite rose 1.9% Wednesday following an upbeat session
in the U.S. a day earlier, and Hong Kong's Hang Seng and Japan's
Nikkei Stock Average also climbed.
Sebastien Galy, senior macro strategist at Nordea Asset
Management, said investors in China seemed to react to the weak
economic data by assuming that the government would bring more
economic stimulus measures, sending stocks higher. The buying, he
thought, was driven mainly by those who had been underinvested in
the early part of the year.
"What seems to be happening is that many had missed the rally
since December and were waiting to buy on a dip," he said. "With
such a psychology, a shock that should be sizable seems to fade
faster."
Figures Wednesday showed Germany's economy expanded 0.4% in the
first quarter, after Europe's largest economy narrowly avoided a
recession late last year. Some analysts remain wary that a slowdown
in business confidence around the world following the latest
tariffs will hurt growth more in the future. The Stoxx Europe 600
edged up 0.5%.
Among individual stocks Wednesday, Macy's swung between gains
and losses and was recently down 1.1% after the retailer posted
stronger-than-expected sales growth in its latest quarter.
Investors will also parse coming earnings from Walmart and other
sellers of consumer goods for possible clues about how the
companies plan to handle 25% tariffs on more than $40 billion of
goods that are imported from China and directly purchased by U.S.
consumers.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and Paul J.
Davies at paul.davies@wsj.com
(END) Dow Jones Newswires
May 15, 2019 12:46 ET (16:46 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.