Wall Street surged on Wednesday after trade-related tensions between the United States and China eased. Moreover, investors are expecting further rate cut by the European Central Bank and the Fed this month. All three major stock indexes closed in the positive territory.
The Dow Jones Industrial Average (DJI) surged 0.9% or 227.61 points to close at 27,137.04. The S&P 500 climbed 0.7% points to close at 3,000.93. The Nasdaq Composite Index closed at 8,169.67, soaring 1.1%. The fear-gauge CBOE Volatility Index (VIX) decreased 3.9% to close at 14.61. A total of 7.59 billion shares were traded on Wednesday, higher than the last 20-session average of 6.85 billion. Advancers outnumbered advancers on the NYSE by a 2.53-to-1 ratio. On Nasdaq, a 2.97-to-1 ratio favored advancing issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory for sixth consecutive day with 21 components of the 30-stock blue-chip index closing in the green while the remaining 9 ended in red. This marked the index’s largest winning streak since late June. Notably, Apple Inc. (NASDAQ:AAPL) and The Boeing Co. (NYSE:BA) jumped 3.2% and 3.6%, respectively. Both these stocks carry 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 also ended in the green. Each of the Technology Select Sector SPDR (XLK) and the Utilities Select Sector SPDR (XLU) climbed 1%. Notably, ten out of total 11 sectors of the benchmark index closed in the green while one finished in red. The Nasdaq Composite finished in the green reversing its three day losing streak due to strong performance of large-cap tech stocks.
Trade Tension Eases
On Sep 11, China’s Ministry of Finance said in a statement on its website that it will exempt some U.S. products in the areas of Cancer drugs, lubricants, pesticides and shrimp meal from tariff for one year more. These products were scheduled to be under the new tariff effective next week.
On the other hand, President Donald Trump has tweeted that he will delay imposing 30% tariff replacing the existing 25% on $250 billion of Chinese goods from Oct 1 to Oct 15 as a “gesture of good will” after Chinese vice premier Liu He requested the same as “the People’s Republic of China will be celebrating their 70th Anniversary.”
As per POLITICO, China has expressed desire to increase imports of U.S. agricultural goods if the U.S. government eases 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 the imposition of 15% tariff on around $160 billion of Chinese goods effective Dec 15.
Market Expects More Stimulus from Major Central Banks
The market is expecting further rate cut by the European Central Bank (ECB) on Sep 12. 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,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.
Economic Data
The Department of Commerce reported that the producer price index rose 0.1% in August compared with a growth of 0.2% in July. The consensus estimate was however zero growth rate in August. The core producer price index (excluding volatile categories of food, energy and retail-trade) grew 0.4% in August. In the last one year, producer price index rose 1.8% in August compared with 1.7% in July.
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