Wall Street ended higher on Thursday following positive developments on the trade war front and an increase in the yield on 10-year US Treasury Note. Meanwhile, decline in fourth quarter 2018 U.S. GDP capped market’s gains. All three major stock indexes finished in the red.
The Dow Jones Industrial Average (DJI) closed at 25,717.46, gaining 0.4%. The S&P 500 Index (INX) increased 0.4% to close at 2,815.44. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 7,669.17, advancing 0.3%. A total of 6.27 billion shares were traded on Thursday, lower than the last 20-session average of 7.54 billion shares. Advancers outnumbered decliners on the NYSE by 1.95-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.84-to-1 ratio. The CBOE VIX decreased 4.8% to close at 14.43.
How Did the Benchmarks Perform?
The Dow ended in positive territory reversing previous day’s losses with 26 stocks of the 30-stocks blue-chip index finishing in the green while four ended in the red. The tech-heavy Nasdaq Composite finished in the green due to strong performance by large-cap tech stocks.
The S&P 500 also closed in the green. The Materials Select Sector SPDR (XLB) gained 1% while Utilities Select Sector SPDR (XLU) lost 1.2%. Notably, nine out of eleven sectors of the benchmark index closed in the green and two finished in the red.
Trade Deal Hope Raises
Year-long trade talks between the United States and China has finally reached advanced stage of negotiations. On Mar 27, Reuters reported that China has made unprecedented proposals on a range of issues including protection of U.S. intellectual property to resolve trade disputes.
On Mar 28, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin have arrived in Beijing for a fresh round of talks with Chinese officials. The two-day meeting will be followed by another round of discussions in Washington.
Yields on US Treasury Notes Gain
On Mar 28, the 10-year US Treasury Note gained 1.6 basis points to 2.39%. This placed the yield of benchmark government bond above its lowest level since December 2017. The yield on 2-year Treasury Note also increased 2 basis points to 2.23%.
However, the yield curve inversion involving 3-month and 10-year Treasury Note has been continuing since Mar 22. This happened for the first time since 2007 and is considered by many economists as a sign of an impending recession.
As a result of higher yields on government, shares of major banks like Bank of America Corp. (NYSE:BAC) and JPMorgan Chase & Co. (NYSE:JPM) increased 1.1% each. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fourth Quarter 2018 US GDP Declines
Final reading of fourth quarter US GDP came in at 2.2%, significantly lower than the previous estimate of 2.6%. Full-year 2018 GDP was 2.9%, below the 3% level targeted by the Trump administration. Business activity especially nonresidential fixed investment grew 5.4% while equipment spending rose 6.6%. Meanwhile, investment in structures fell 3.9% and residential investment declined 4.7%.
Economic Data
Initial jobless claims fell by 5,000 to a seasonally adjusted figure of 211,000 for the week ended Mar 23. The figure was lower than the consensus estimate of 222,000. The number of people already collecting unemployment benefits, popularly known as continuing claims, increased by 13,000 to 1.76 million.
The National Association of Realtors reported that pending home sales declined 1% in February. Consensus estimate was for a growth of 0.5%. Year over year, pending home sales declined 4.9%. Annualized contract signings have declined for 14 straight months.
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