Wall Street closed firmly higher on Friday on investor’s hopes of a possible truce in the eight-month old trade conflict between the United States and China. U.S President Donald Trump and Chinese President Xi Jinping were scheduled to meet for a dinner on the sidelines of the G-20 summit in Argentina on Dec 1. All three major stock indexes finished deep in green. For the week as a whole, indexes posted record gains. For November, all three indexes ended in the positive territory.
The Dow Jones Industrial Average (DJI) closed at 25,538.46, gaining 0.8% or 199.62 points. The S&P 500 Index (INX) also increased 0.8% to close at 2,760.17. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,330.54, advancing 0.8%. A total of 8.39 billion shares were traded on Friday, higher than the last 20-session average of 7.63 billion shares. Advancers outnumbered decliners on the NYSE by 1.17-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.24-to-1 ratio. The CBOE VIX decreased 3.8% to close at 18.07.
How Did the Benchmarks Perform?
The Dow ended in positive territory with twenty three components of the 30-stock blue-chip index closing in the green while remaining seven closed the red. Meanwhile, the tech-heavy Nasdaq Composite also closed in green due to strong gains of trade-sensitive large-cap stocks.
The S&P 500 also closed in the green led by 1.5% gain of Utilities Select Sector SPDR (XLU) and 1% rise of Health Care Select Sector SPDR (XLV), Materials Select Sector SPDR (XLB), Technology Select Sector SPDR (XLK) and Real Estate Select Sector SPDR (XLRE). Notably, nine out of total 11 sectors of the benchmark index closed in the green while two finished in the red.
Investors Expect a US -China Trade Truce
On Nov 30, U.S. trade representative Robert Lighthizer told reporters that he will be “very surprised” if the upcoming dinner meeting between the U.S. President Donald Trump and Chinese President Xi Jinping fail to bring any fruitful result. Reuters also quoted a Chinese official as saying that “consensus is steadily increasing” on trade trade issues.
Investors are closely watching the ongoing G-20 summit in Argentina where President Trump is expected to meet Chinese President Xi Jinping. Both sides are likely to try to reach an amicable solution to the eight month old trade-related conflict which has resulted in several billions of dollars of tariffs imposed on both sides.
U.S. stocks finished sharply higher this week. The Dow gained 5.2%, its highest weekly gain since November 2016. The S&P 500 and Nasdaq Composite gained 4.9% and 5.6%, respectively. Both indexes recorded strongest weekly performance since December 2011.
Positive comments from both the United States and Chinese officials about a possible solution regarding the ongoing trade-related conflicts between the two largest trading powers of the world have strengthened investors’ confidence on stock markets.
Moreover, Fed chair Jerome Powell’s comment that key interest rates are close to neutral level bodes well for investors. A series of Key economic reports such as second estimate of third quarter GDP, personal consumption expenditure (PCE) and PCE inflation rate in October, November consumer confidence also motivated investors to invest in risky assets like equities.
For the month of November, all the major stock indexes – the Dow, S&P 500 and Nasdaq Composite – gained 1.7%, 1.8% and 0.3%, respectively.
Wall Street gained significantly in the first week of November on midterm Congressional election results. Investors’ optimism increased since U.S. Congress is now divided with Republicans strengthening their hold on the Senate while Democrats have regained control of the House of Representatives after eight years.
However, markets took a severe nosedive in the second and third weeks due to plunge in crude oil prices . Both WTI and Brent crude plunged to their lowest levels for 2018. Moreover, technology stocks continued their downward journey led by FAANG stocks.Growing concerns among investors that banks will face tighter regulations once Democrats take control of the House of Representatives added to the losses.
However, in the last week, Wall Street posted a smart recovery buoyed by investor’s expectation of possible resolution of the United States – China trade conflicts, Fed chairman’s comment on rate hike and strong economic data.
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