• Wall Street extends rally to second day on trade optimism

    wall street floor

    (Reuters) – Gains in technology and consumer discretionary stocks on Monday helped Wall Street extend Friday’s rally, with the resumption of U.S.-China trade talks easing some of the concerns that had pummeled the market in the second half of 2018.

    The benchmark S&P 500’s (SPX) 1.3 percent advance adds to a 3.4 percent surge on Friday, when strong U.S. jobs data eased worries over economic health and the Federal Reserve calmed nerves over interest rate hikes crimping growth.

    Fears of a global slowdown have led to a sharp pullback in the markets over the last few months and in analysts’ estimates for corporate growth. But since hitting a 20-month low on Christmas Eve just a rounding error from levels considered to be a bear market, the S&P has now gained over 9 percent.

    China has the “good faith” to work with the United States to resolve trade frictions, the foreign ministry said, while U.S. Commerce Secretary Wilbur Ross said he saw “a very good chance that we will get a reasonable settlement” as the two countries started their first face-to-face talks since a 90-day truce was agreed in December.

    “The main thing is the administration’s implied progress on talks with China. That’s something that market sees as very important,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

    Ten of the 11 major S&P sectors were higher. The biggest gain was logged by the consumer discretionary index (SPLRCD), which jumped 2.74 percent, led by gains in Amazon.com Inc (O:AMZN) and Netflix Inc (O:NFLX).

    Energy stocks (SPNY) gained 2 percent as oil prices climbed about 3 percent on support from OPEC production cuts. [O/R]

    The technology sector (SPLRCT) gained 1.47 percent. The Philadelphia Semiconductor index (SOX), which consists of many companies dependent on China for revenue, jumped 2.76 percent.

    At about 1:20 p.m. ET, the Dow Jones Industrial Average (DJI) was up 239.90 points, or 1.02 percent, at 23,673.06. The S&P 500 (SPX) was up 33.67 points, or 1.33 percent, at 2,565.61 and the Nasdaq Composite (IXIC) was up 113.86 points, or 1.69 percent, at 6,852.72.

    Utilities (SPLRCU) was the only sector down, dragged lower by PG&E Corp’s (N:PCG) 20.7 percent slump. This followed a Reuters report that the California utility is exploring filing for bankruptcy protection as it fears a massive charge in the fourth quarter related to potential liabilities from wildfires.

    With earnings season around the corner, investors have almost reconciled to a slowdown in fourth-quarter profit growth, but will scrutinize forecasts for signs of further weakness.

    “What will concern them will be the forecast, those will be critical to whether just producing a good bottom line number is enough for investors,” Meckler said.

    Analysts now estimate fourth-quarter profit growth at S&P 500 companies at about 15 percent, flat from a year earlier. That is lower than the 20 percent growth expected in early October, according to Refinitiv IBES data. The estimate for 2019 profit growth has fallen to about 7 percent from 10 percent.

    Microsoft Corp (O:MSFT) advanced about 1.2 percent, while Amazon gained 3.1 percent as the two companies vied to become the U.S. company with the largest market capitalization.

    Dollar Tree Inc (O:DLTR) jumped 6.3 percent after activist investor Starboard Value LP called on the retailer to sell its underperforming Family Dollar business and proposed replacing a majority of its board.

    Loxo Oncology Inc (O:LOXO) surged 65.8 percent after Eli Lilly and Co (N:LLY) said it would buy the cancer drug developer for about $8 billion.

    Advancing issues outnumbered decliners by a 5.23-to-1 ratio on the NYSE and by a 3.61-to-1 ratio on the Nasdaq.

    The S&P index recorded no new 52-week highs and no new lows, while the Nasdaq recorded 25 new highs and 11 new lows.

    Image source: Reuters

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