Jun 18, 2019

Wall Street I Midday Report I S&P 500 jumps to within 1% of record as Trump tweets plan for ‘extended meeting’ with President Xi

Mark DeCambre

  • President Trump tweeted that he had a “very good” telephone conversation with President Xi Jinping
  • ECB President Mario Draghi set the stage for a rally in stocks after hinting at further eurzone stimulus
  • Facebook officially launches its foray into cryptocurrencies, Libra coin
U.S. stock indexes headed sharply higher midday Tuesday, pushing the broad-market S&P 500 to within 1% of a closing record as President Donald Trump tweeted that had a productive conversation with Chinese counterpart Xi Jinping.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, +1.23% rose 330 points, or 1.3%, at 26,444, the S&P 500 index SPX, +1.04% advanced 31 points, or 1.1%, at 2,920, while Nasdaq Composite Index COMP, +1.51% climbed 121 points, or 1.6%, at 7,966.
The day’s gains put the S&P 500 about 0.9% from its April 30 closing record, the Dow was about 1.4% from its Oct. 3 peak, while the Nasdaq was just a little over 2% from its May 3 closing record, according to FactSet data.
What’s driving the market?
U.S. President Donald Trump on Tuesday said over Twitter that there will be an “extended meeting” with President Xi Jinping of China at the Group of 20 meeting in Japan. Reports from Bloomberg News also confirmed a plan for the two leaders to meet on the sidelines of the gathering of developed global leaders.
The tweet comes after U.S.-Chinese trade talks had stalled, and there had been doubt over whether an additional 25% tariff on more than $300 billion in Chinese goods would go into effect soon, further escalating the protracted Sino-American trade confrontation, which has hobbled global markets.
Read: ‘Currency war’ fears rise as Trump slams Draghi’s hint at more ECB stimulus
Equity indexes were already buoyant after ECB President Mario Draghi at an annual central bank conference in Sintra, Portugal said policy makers would consider “in the coming weeks” how to adapt its policy tools “commensurate to the severity of the risk” to the economic outlook, a signal that the central bank may be willing to lower rates. The central banker’s remarks sent the euro EURUSD, -0.1694% sliding against the U.S. dollar.
Draghi’s comments come as the Federal Reserve kicks off its policy-setting Tuesday, with expectation that policy makers will indicate a willingness to reduce benchmark borrowing costs this year amid global trade tensions, a slowdown in the global economy as well as in the U.S. Investors want to see if those expectations match up to what the Fed is thinking, though no move on interest rates is expected at this week’s meeting.
What are strategists saying?
“The prospect of ‘additional stimulus’ jolted stock markets higher, and it appears the ECB is following in the Fed’s footsteps of using dovish language,” wrote David Madden, market analyst at CMC Markets UK, in a Tuesday research note.
“And his comments will add further pressure on the US Federal Reserve to cut rates. Following his speech, yields on a 10 year bund headed further into negative territory – to around 30bps – forcing people’s hunt for yield to continue apace,” Mark Benbow, manager of the Kames Short-Dated Yield Bond Fund, said in a note.
“If the Fed doesn’t appear sufficiently dovish – including taking the word “patient” out of their statement – or the G20 meeting doesn’t result in significant progress in the trade war with China, then the market could experience a sharp pullback,” wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, in a Tuesday research note.
Which stocks are in focus
Facebook Inc. shares FB, +0.28% shares on Tuesday were down 0.3% after the social-media giant unveiled its cryptocurrency, Libra coin, offering users the ability to make payments on the internet.
Shares of Snapchat-parent Snap Inc. SNAP, +8.93%   rose more than 7% after an analyst expressed increased optimism about the technology company’s latest attempts to monetize its platform and drive user growth.
How are other assets trading?
Hong Kong’s Hang Seng Index HSI, +1.00% rose 1% and China’s Shanghai Composite Index SHCOMP, +0.09% inching up less than 0.1%. Japan’s Nikkei 225 NIK, -0.72% fell 0.7%, while in Europe, the Stoxx Europe 600 SXXP, +1.67% headed 1% higher after Draghi’s comments.
Meanwhile, the 10-year Treasury note TMUBMUSD10Y, -1.82% touched a 21-month low at 2.02%, while the comparable German debt TMBMKDE-10Y, -31.02% known as the bund, was trading around a record-low yield at negative 0.313%. Bond prices and yields move in the opposite direction.
West Texas Intermediate crude futures CLN19, +3.66%  were gaining in late-morning trade, gold futures GCN19, +0.46% bounded higher even as the U.S. dollar bucked up against the euro, with the ICE U.S. Dollar index DXY, +0.09% climbing 0.2% at 97.74.

Source: MarketWatch

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