Wall Street closed marginally higher on Friday after the United States and China reached an agreement on phase-one of the broader trade deal. Moreover, possibility of Brexit also raised investors’ confidence. However, some concerns over U.S.-China trade deal and weak retail sales data kept investors’ enthusiasm in check. All three major stock indexes ended in positive territory for the day and also for the week.
The Dow Jones Industrial Average (DJI) gained 3.33 points to close at 28,135.38. The S&P 500 increased 0.23 points to close at 3,168.80. Meanwhile, the Nasdaq Composite Index closed at 8,734.88, adding 17.56 points. The fear-gauge CBOE Volatility Index (VIX) decreased 9.4% to close at 12.63. A total of 7.4 billion shares were traded Friday, higher than the last 20-session average of 6.8 billion. Advancers outnumbered advancers on the NYSE 1.19-to-1 ratio. On Nasdaq, a 1.07-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in positive territory with 16 components of the 30-stock blue-chip index closing in the green while 14 ended in red. Within the Dow, Apple Inc. (NASDAQ:AAPL) with a Zacks Rank of #3 (Hold) surged 3.7% to close at record high $275.15. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-laden Nasdaq Composite also ended in the positive territory due to strong performance of tech stocks. The S&P 500 also finished in the green. The Utilities Select Sector SPDR (XLU) gained 0.8% while both the Materials Select Sector SPDR (XLB) and Energy Select Sector SPDR (XLE (NYSE:XLE)) lost 0.8%. Notably, six out of 11 sectors of the benchmark index closed in the red while five finished in the green.
U.S-China Partial Trade Deal
On Dec 13, both United States and China declared that they have reached a phase-one trade deal to resolve more than a year-long trade dispute and tariff war. The deal is expected to be signed by the two presidents in the first week of January 2020, after clearing legal hurdles in respective parliaments.
Per the deal, the United States will reduce tariff rate from 15% to 7.5% on $120 billion Chinses exports while keeping 25% tariff intact on $150 billion Chinse goods, mostly used as inputs for the high-tech sector. Moreover, the Trump administration will also cancel imposition of 15% tariff on fresh $160 billion Chinese products mainly used for making consumer goods.
On the other hand, China has pledged to purchase $40 billion agricultural products from the United States per year. U.S. officials are still trying to raise the threshold to $50 billion per annum. Moreover, China will also rollback on some tariffs imposed on U.S. exports.
However, the deal has explained the date from which China will increase imports U.S. farm products, the date when the United States will rollback other tariffs on China. Moreover, the most important disputes on intellectual property and technology theft are yet to be resolved.
Possibility of Brexit Soon
On Dec 12, British prime minister Boris Johnson and his Conservative Party won a landslide victory in the recently concluded general election in the U.K. Notably, Boris Johnson is a major supporter of Brexit and that was his main election issue.
After winning the election, he said, “At this stage it does look as though this one-nation Conservative government has been given a powerful new mandate, to get Brexit done and not just to get Brexit done but to unite this country and to take it forward.”
Per CNBC,European Union leaders have roundly declared that it’s now time to get on with Brexit after U.K. Prime Minister Boris Johnson secured an emphatic win in the country’s general election.
Economic Data
The Department of Commerce reported that retail sales in November increased 0.2% compared with a revised 0.4% increase in October. Consensus estimate was for a growth of 0.4%. Year over year, retail sales grew 3.3%. The core retail sales increased 0.1% in November as against 0.3% in October. This metric correspond most closely with the consumer spending component of the U.S. GDP.
Weekly Roundup
Last week was an impressive one for Wall Street. All three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – rallied 0.4%, 0.7% and 0.9%, respectively. Agreement on phase-one deal of more than a year-long trade dispute between the United States and China strengthened investors’ confidence on stock markets.
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