Dow Rallies as Wall Street Expects at Least a Partial U.S.-China Trade Agreement

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Here Are 3 Hot Things to Know About Stocks Right Now

  • The Dow Jones Industrial Average surged after the first day of high-level U.S.-China trade negotiations reportedly went better than expected.
  • Apple (AAPLGet Report) climbed after the tech giant removed a controversial app from its App store linked to the Hong Kong protests and traders bet that progress in U.S.-China trade talks could spur smartphone demand.
  • Bank stocks advanced on positive trade talk and reports of a breakthrough in Brexit negotiations, with JPMorgan Chase (JPMGet Report) , Citigroup  (CGet Report)  and Bank of America (BACGet Report) all advancing.

Wall Street Overview

Stocks climbed Friday after the first day of high-level U.S.-China trade negotiations reportedly went better than expected, which could lead to at least a partial resolution of the 15-month dispute between the world’s two biggest economies.

The Dow Jones Industrial Average surged 321 points, or 1.21%, to 26,817. The S&P 500 advanced 1.17% and the Nasdaq climbed 1.29%.

Donald Trump said he would meet Friday with China’s Vice Premier Liu He. Their sit-down would mark a substantial improvement in U.S.-China relations since an ad-hoc agreement on trade and tariffs was reached and then abandoned during the June G-20 Summit in Japan.

“We just completed a negotiation with China, we’re doing very well, we’re having another one tomorrow,” the president told reporters in Washington on Thursday. “I’m meeting with the vice premier over at the White House, and I think it’s going really well. We’re going to see them tomorrow, right here, and it’s going very, very well.”

While few details are known about the meeting, which included U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer, analysts suggested the two sides could agree on easy-to-enact policies, such as currency manipulation and agricultural purchases, in order to engender goodwill for future negotiations on more complex topics and avoid a fresh round of tariff increases on $250 billion worth of China-made goods set for Oct. 15.

Alec Young, managing director of global markets research for FTSE Russell, said that while markets are reacting positively to the likelihood of a limited U.S.-China trade deal, “it’s critical to remember that all existing tariffs are expected to remain in place.”

“Until we get a deal that ends existing tariffs, 2020 earnings visibility will remain murky, especially in light of the ongoing weakness in the global growth outlook,” he said. “So, while this is good news in that things won’t be getting any worse, they’re not getting much better either. It’s only because expectations are extremely low that stocks are reacting so positively to this news.”

Both sides are talking and that’s a good thing, Young added, “but for stocks to move much higher there’s going to have to be more meat on the bones.”

The positive trade talk, combined with news of a potential Brexit deal, helped boost bank stocks, with JPMorgan Chase (JPMGet Report) , Citigroup (CGet Report)  and Bank of America (BACGet Report) all advancing.

Apple (AAPLGet Report) climbed 1.3% to $233.08 after the tech giant removed a controversial app from its App store linked to the Hong Kong protests and traders bet that progress in U.S.-China trade talks could spur smartphone demand.

Twilio (TWLOGet Report) advanced 1.6% to $112.08 after RBC Capital Markets initiated coverage on the stock with an outperform rating and a $135 one-year price target on what it sees as “one of the most durable growth stories in software.”

Fastenal (FASTGet Report) surged nearly 9% to $33.80 after the industrial and construction supply company beat Wall Street’s third-quarter earnings and sales expectations.

SAP SE (SAPGet Report)  rose 12.7% to $34.95 after the enterprise software company‘s high-profile CEO, Bill McDermott, said he will step down after nearly a decade at the helm.

Oil prices were higher after Iran said one of its commercial oil tankers was hit by two missiles near the Saudi Arabian port of Jeddah, reigniting military tensions in the Gulf region following attacks on Saudi ships and oil facilities last month.

Contracts for Brent crude, the global benchmark, were rising slightly to $59.48 a barrel. West Texas Intermediate crude contracts, which are more tightly linked with U.S. gasoline prices, edged up to $53.78 a barrel.

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