U.S. stocks climb as investors cheer U.S.-China trade talks

Stocks marched higher on Wall Street Monday after President Donald Trump agreed to hold off on raising tariffs on Chinese goods, which would have escalated a damaging trade war between the world’s two largest economies.

Investors had been growing increasingly optimistic over the last two weeks that the U.S. and China were moving closer to a resolution of their dispute. The fight is over U.S. complaints that Beijing steals technology or pressures companies to hand it over.

Although Wall Street ended the day off its earlier highs, the Dow Jones industrials average rose 60 points, or 0.2 percent, to close at 26,092. The S&P 500 index added 0.1 percent, and the Nasdaq composite gained 0.4 percent.

Banks and technology stocks accounted for much of the gains, while consumer goods and utility companies lagged the overall market.

China faced a March 2 deadline when the U.S. would have increased punitive duties on $200 billion worth of Chinese imports. Mr. Trump didn’t set a new deadline but said the two sides had held “productive talks” on some of the more difficult issues, and he’s willing to meet with Chinese President Xi Jinping if negotiations progress.

Bannon: Trump should proceed with tariffs if China doesn’t come to an agreement

The trade war and its hefty tariffs have already raised costs for businesses and consumers. Any additional escalation could shake investor confidence as an economic slowdown looms over China and Europe.

In a note, LPL Financial said “the Dow’s strength at this time of the year is especially impressive. To put it in perspective, the Dow closed up the first eight weeks of 2019 — the second-best win streak to start a year, eclipsed only by the 11 consecutive weekly wins that started 1964.”

What could this mean for future market performance? “Long weekly win streaks actually have led to stronger performance,” said LPL Senior Market Strategist Ryan Detrick in the note. “In fact, there have been 15 other nine-week win streaks since 1900, and a year later the Dow’s median return was nearly 18%. Not bad at all.”

Chinese stocks were higher in Monday trading, as investors there also cheered President Trump’s plan to hold off on additional tariffs, with UBS noting that the onshore CSI 300 equity index – which comprises the top 30 stocks traded in Shanghai and Shenzhen — surged 5.95 percent on Monday. That’s the benchmark’s best one-day gain since July 2015.

Oil prices fall

Elsewhere, oil prices fell more than 3 percent after Mr. Trump complained they were getting too high. On Friday, oil closed at the highest level since mid-November.

Industrial giant General Electric rose 6.4 percent after it announced plans to sell a biotech unit. Goldman Sachs Group gained 1.4 percent as banks led stocks higher.

The gains come as investors have a full schedule of economic and corporate news to consider this week.

Macy’s and other retailers will report their latest financial results this week. The Commerce Department will release fourth-quarter GDP figures on Thursday, and Federal Reserve Chairman Jerome Powell is scheduled to give two days of Congressional testimony this week.

Regarding the overall market lift from the U.S.-China talks, “I feel like we’re in a position where the president is interested in making deals,” said Jamie Cox, managing partner at Harris Financial Group. The U.S. election cycle is just around the corner, giving the president an incentive to pursue deals and keep the economy and markets stable, he said.

Even so, markets may be too optimistic about what’s possible in any China deal, as negotiations over intellectual property concerns will likely take more time. Investors need to remain cautious, Cox said, citing soft economic data, including the surprise drop in retail sales in December.

“This is sort of an economic opportunity for investors to rebalance,” he said, “to get a little less aggressive in their portfolios.”

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