Wall Street Bounces Back as Worries of Trade War Fade

By Rafael Matsunaga (Flickr) via Wikimedia Commons

On Monday, Wall Street was able to score its best day in 2-1/2 years, and the Dow Jones Industrial Average observed its third-biggest point gain ever, as fears regarding trade war eased on the reports that China and the United States are willing to renegotiate the imbalances on tariffs and trade.

The rally was fueled by technology stocks. It came on the heels of the worst weekly performance of the indexes since January 2016, the gain of the S&P 500 making up for less than half of the almost 6 percent loss of the prior week.

The head of Markets Structure, a Proprietary Trader at Bright Trading LLC in Las Vegas, Dennis Dick, stated: “We saw a really good rally because of potential talks with China.

“People are taking advantage of the huge dip last week.”

Dick continued: “I don’t think you’re out of the woods yet. There’s political uncertainty.”

The decline from last week was partly fueled by the tensions surrounding the move of Donald Trump, the President of the United States of America, to impose tariffs on up to $60 billion of imports from China, in addition to those that are imposed on steel, aluminium, and solar panels.

However, tensions were calmed as Li Keqiang, the Chinese Premier, repeated vows to maintain the trade negotiations and ease the access to American businesses.

On Sunday, Steve Mnuchin, the Treasury Secretary of the United States, said that he believed that Washington could be able to reach an agreement with China regarding some issues. However, he said tariffs would not be put on hold “unless we have an acceptable agreement that the president signs off on.”

The Chief Market Strategist at Bruderman Asset Management in New York, Oliver Pursche, stated: “It’s clearly the easing of trade tensions. The comments by Steve Mnuchin late yesterday gave room for negotiation with China.”

However, China did request for unity among the members of the World Trade Organization to prevent the United States from “wrecking” the organisation, and urged opposition to the tariffs of Trump that is targeting the alleged intellectual property theft of China.

The Dow Jones Industrial Average increased by 2.84 percent or 669.4 points, to 24,202.6. The two larger point gains for the Dow were observed last October of 2008. The S&P 500 was able to gain 2.72 percent or 70.29 points, to 2,658.55 and the Nasdaq Composite rose by 3.26 percent or 227.88 points, to 7,220.54.

The three major indexes of the United States experienced their best percentage gains since the 26th of August, 2015.

All of the 11 major sectors of the S&P 500 were able to close in positive territory, led by indexes of finance and technology, which were up by 3.2 percent and 4.0 percent, respectively.

The tech sector observed its largest daily percentage gain since August of 2015 and financials was able to have their best day since November of 2016.

Microsoft was able to pull the indexes higher, gaining 7.6 percent. Morgan Stanley increased its price target on the stock of the tech company, saying that its market value could hit $1 trillion on the improved margins and growth in cloud computing.

Intel advanced by 6.3 percent after Raymond James, a brokerage, upgraded the technology to “market perform.”

Facebook was able to close up at 0.4 percent after several days of drops as the U.S. Federal Trade Commission announced that it was investigating on how the company allowed the data of approximately 50 million users to be accessed by Cambridge Analytica.

The most widely followed barometer of expected near-term volatility for the S&P 500, the Cboe Volatility Index, finished down 3.84 points at 21.03.

Advancing issues were able to outnumber the declining ones on the NYSE by a ratio of 3.04-to-1; on Nasdaq, a ratio of 2.27-to-1 favoured the advancers.

Volume on exchanges in the United States was 7.30 billion shares, below the average of 7.35 billion for the last 20 trading days.