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Stocks - Wall Street Surges on Hopes for China Trade Deal and Lower Rates

Published 06/18/2019, 03:37 PM
Updated 06/18/2019, 05:02 PM
© Reuters.

Investing.com - Stocks took off on Tuesday after President Donald Trump announced he plans to meet with Chinese President Xi Jinping in a bid to resolve their trade dispute.

In addition, pressure to move U.S. interest rates lower increased after the head of the European Central Bank said he was prepared to cut interest rates to support the euro zone economy.

The rally brought the S&P 500 to within 1.3% of a new high in a rally pushed by big tech stocks and Boeing (NYSE:BA).

The S&P 500 rose 1%. The Dow added 1.4%, and the Nasdaq Composite jumped 1.4%. The Dow is within 1.8% of an all-time high. The Nasdaq is 2.7% below its high reached in April. The Nasdaq 100 index, which was up 1.5% on Tuesday, is still 2.8% below its 52-week high.

The rally was started by ECB President Mario Draghi's declaration the bank was prepared to restart its economic stimulus program if the outlook for inflation does not improve.

It took off later when Trump said he planned an extensive meeting with Xi at the G-20 meeting this month in Tokyo. The U.S. and China have been locked in a bitter trade dispute for more than a year that has included tariff increases and roiled economies worldwide and pushed oil prices lower.

The two announcements helped U.S. interest rates move lower, even as Trump accused Draghi of currency manipulation. The 10-year Treasury yield fell to 2.06% on Tuesday, down more than a fifth this year alone and the lowest level since Nov. 8, 2016.

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The Federal Reserve is meeting Tuesday and will announce a rate decision Wednesday afternoon. Investing.com's Fed Rate Monitor Tool Fed Rate Monitor Tool suggests a 73% chance the central bank will leave its key Federal Funds rate at 2.25% to 2.5% and more than an 80% chance rates will be cut in July.

Boeing was the fifth-best S&P 500 performer as well as the top Dow stock. Boeing jumped 5.4% and contributed nearly 37% of the Dow's 353-point gain following an order for its troubled 737 Max jet at the Paris Air Show.

Apple (NASDAQ:AAPL), up 2.4%, and Microsoft (NASDAQ:MSFT), up 1.7%, contributed 29.8% of the Nasdaq 100's gain of 109 points on the day.

The ally was the biggest for the S&P 500 and the Dow since June 4 and the biggest for the Nasdaq since June 7. The S&P 500 is up 16.4% this year. The Dow is up 13.5% and the Nasdaq is up 19.9%.

The trade and interest-rate news offset mixed news on housing starts for May. Starts were higher than expected, but off slightly in the month. Estimates for March and April were revised higher. Building permits were higher. The U.S. housing is expected to be strong this year, thanks to lower mortgage rates, but most demand is coming from first-time buyers struggling with affordability issues.

Oil prices moved higher on the trade-and-interest-rate news and a report from The Wall Street Journal that Saudi Arabia is pressuring OPEC and OPEC-plus members to continue to cap production for the rest of the year. That helped energy stocks move higher.

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Chevron NYSE:CVX) and Exxon Mobil (NYSE:XOM) were up 1.3% and 0.9%, respectively. The Philadelphia oil service index climbed 2.8%. WTI futures were up 3.8% to $53.90 a barrel. Brent futures, the global benchmark, rose 2% to $62.14 a barrel.

Oil prices have fallen substantially from their April highs because U.S. oil production is rising and there are signs many OPEC members aren't abiding with the deal to cut oil production.

Winners and losers in the S&P 500

Xilinx (NASDAQ:XLNX), Micron Technology (NASDAQ:MU) and Qorvo (NASDAQ:QRVO) were among the top S&P 500 performers on the day.

SL Green Realty (NYSE:SLG), Constellation Brands (NYSE:STZ) and Western Union (NYSE:WU) were among the worst performers.

Latest comments

Summary: mani pulation is now directly from the wh ite ho use instead of the usual news and press trying to link moves in the market. Incredible that everyone is happy when going to a recession when applying same old instruments proven useless before. Also tomorrow Powell will said the economy is ok but we need to help because we are loosing speed in the Ballon. Basically make money worry later.
look at the pattern trump is following as he books profits on Dow from the chaos he created
Trump looks rejectedly afar from the punch bowl as China and Russia tango.
Call the paramedics, I think we have a Hopium Overdose. I see no need to lower rates. I think they should stay with the original plan to raise by the end of the year.
Lots of manipulation.
uhh.. That's what the federal reserve is for.
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