U.S. stocks pared early gains Monday, including a new intraday high for the S&P 500, but still ended up on the day after Washington and Beijing agreed to refrain from escalating their trade dispute.
How did the benchmark indexes fare?
The Dow Jones Industrial Average DJIA, +0.44% closed up 117 points, or 0.44%, to 26,717, while the S&P 500 index SPX, +0.77% held onto a 0.77% gain, or 23 points, at 2,964. The Nasdaq Composite COMP, +1.06% was 85 points higher, or 1.06%, at 8,091.
Earlier this morning, the S&P touched a new intraday high at 2,977.86, when it had risen as much as 36.1 points, or 1.2%. At its peak Monday, the Nasdaq rose 144.2 points, or 1.8%, while the Dow rose 290.68 points, or 1.1%.
The gains come after the Dow logged its best June since 1938 and the S&P 500 rang up its best June since 1955.
What’s driving the market?
Stocks initially jolted higher Monday after Saturday’s meeting between China’s President Xi Jinping and President Donald Trump at the G-20 meeting in Japan, mainly because Trump said the U.S. would maintain current tariffs but hold off on new ones. Trump also said he would ease up on a ban on Huawei, allowing U.S. companies to sell their products to the Chinese tech giant, though the company will remain on a trade blacklist.
Trump said talks went “even better than expected” and that “we’re going to work with China where we left off.”
I had a great meeting with President Xi of China yesterday, far better than expected. I agreed not to increase the already existing Tariffs that we charge China while we continue to negotiate. China has agreed that, during the negotiation, they will begin purchasing large…..
But the huge gains in early trade were short-lived. “I don’t like these larger run-ups over the weekend because they always seem to fizzle out,” said James Cox, managing partner at Harris Financial Group, in an interview.
“The gaming begins when trading starts, but the reality of the situation is that the potential damage of the trade war is already done,” he said. “We are about a year into the new trade regime and we are now just seeing the impact of tariffs on earnings.”
While the U.S.-China trade truce allows the world’s two largest economies to restart trade negotiations, there are still questions as to which products U.S. companies will be allowed to sell to Huawei. Investors also have been given little information as to the timing of future trade talks and whether or when existing tariffs could be rolled back. The Commerce Department is currently working on a reform of export licensing respecting Huawei, it told the Wall Street Journal.
But data on China and the global economy was less cheery, with a private gauge showing activity in China’s manufacturing sector cooling in June and moving into contraction territory.
“Economic data…was universally disappointing overnight,” wrote Tom Essaye, president of the Sevens Report, in a Monday note to clients. “Every manufacturing PMI missed expectations this morning, including those from China, Germany, the EU and Great Britain. All of those PMIs are now below 50, signaling widespread contraction in manufacturing activity.”
U.S. manufacturing showed surprising strength in June, however, with the IHS-Markit purchasing-manager’s index rising to 50.6 in June, from 50.1 in May. Separately the Institute for Supply Management’s (ISM) index showed the sector slowing from 52.1% in May to 51.7% in June, but the reading was better than economists expectations of 51.3%, per a MarketWatch poll.
“In the context of the trade news, the [ISM reading] is another positive,” said Mike Loewengart, vice president of investment strategy at E-Trade, in an interview, though he noted that the U.S. manufacturing sector has weakened in recent months. “When it comes to manufacturing, trade disputes are not without impact,” he said.
Meanwhile, construction spending fell by 0.8% in May, the largest decline since November and below economists’ expectations of 0.3% growth. Spending in April was revised higher to a 0.4% gain from the prior estimate of a flat reading.
What stocks are in focus?
Applied Materials Inc. AMATWealth Strength IndexAMAT is Extremely Flat and trending Down, +1.71% shares ended up 1.7% Monday, after the chip-equipment company said Monday that it will purchase Kokusai Electric for $2.2 billion in cash from private-equity giant KKR & Co. KKR, +2.41% .
Semiconductor stocks generally rallied early Monday, but trimmed gains. Shares of Qorvo Inc. QRVO, +5.96% were higher by 5.9%, Qualcomm Inc.QCOMWealth Strength IndexQCOM is Moderately Up and trending Up, +1.91% gained 1.9% and Broadcom Inc. AVGOWealth Strength IndexAVGO is Extremely Flat and trending Up, +4.34% stock advanced more than 4%. The PHLX Semiconductor index SOX, +2.65% rose 2.6%
Boeing BA, -2.07% shares dropped 7.5%, making it the biggest drag on the Dow for the day. The company has been struggling with the grounding of its 737 Max jets, but also more broadly is vulnerable to tariff negotiations.
Shares of Genesee & Wyoming Inc. GWR, +8.85% rallied 8.8%, after the railroad company agreed to be acquired by Brookfield Infrastructure Partners LP, in a deal valued at $8.4 billion, or 12% above its market value at the close of trade Friday.
Coca-Cola Co. KO, +1.34% announced a decision from the American Arbitration Association that allows the company to sell a line of energy-drink products without breaking the terms of a contract with Monster Beverage Corp.MNSTWealth Strength IndexMNST is Moderately Flat and trending Down, +1.47% . Coke shares rose 1.3%, while Monster stock added 1.5%.
Shares of Coty Inc. COTY, -13.51% fell 13.5% Monday, after the beauty-products company announced a turnaround plan that will add $160 million in extra costs and involve a $3 billion impairment of its intangible assets.
Dow component Pfizer Inc. PFE, +1.04% announced a successful study of on an eczema treatment product. Its shares rose 1% Monday.
Freeport-McMoRan Inc.’s stock FCX, -1.38% fell 1.4% Monday, after the metals miner lowered its second-quarter outlook given the drop in average copper prices during the quarter.
How did other markets trade?
The yield on the 10-year Treasury note TMUBMUSD10Y, -0.43% rose 2 basis point to 2.027%.
Asian markets jumped along with stock futures, while European stocks traded higher, with the Stoxx Europe 600 SXXP, +0.78% rising 0.8%.
The U.S. dollar DXY, +0.01% was on the rise, while gold prices US:GCM9 sank 1.8%, after scoring the biggest monthly gain in three years.
Oil prices US:CLM9 traded flat, after Russia and Saudi Arabia agreed to extend the Organization of the Petroleum Exporting Countries‘s deal to cut oil production by another six to nine months, according to comments by Russian President Vladimir Putin at the G-20 leaders summit in Japan on Saturday.
OPEC plus a group of 10 countries led by Russia will meet Monday and Tuesday in Vienna.
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