U.S. stocks jumped Monday after Commerce Secretary Wilbur Ross stoked hopes that a first phase trade agreement with China would get done. The comments helped investors shrug off some unfavorable news from companies including McDonald’s and Under Armour.
All three major stock indices sailed to fresh record intraday highs. The Dow hit a fresh intraday high for the first time since July 16, and closed at a record high of 27,462.72.
Here’s where the markets settled Monday at the end of regular equity trading:
S&P 500 (^GSPC): +0.37%, or 11.37 points
Dow (^DJI): +0.42%, or 114.89 points
Nasdaq (^IXIC): +0.56%, or 46.8 points
10-year Treasury yield (^TNX): +4.9 bps to 1.777%
Gold (GC=F): -0.07% to $1,510.40 per ounce
On Sunday, U.S. Commerce Secretary Wilbur Ross told Bloomberg News that he was confident the U.S. would reach the first part of a trade agreement with China this month, sticking to the timeline previously touted by the administration. Ross also said U.S. firms would receive licenses “very shortly” to begin selling parts to China’s Huawei. Shares of U.S.-based semiconductors including Qualcomm (QCOM) and Intel (INTC), which count Huawei as a customer, outperformed in early trading.
These comments came after the Office of the U.S. Trade Representative said in a statement Friday that Robert Lighthizer and Treasury Secretary Steven Mnuchin had a “constructive call” with China’s Vice Premier Liu He to discuss the phase one agreement. China’s Ministry of Commerce corroborated this with a statement of its own saying the sides had reached a “consensus on principles.”
More positive rhetoric emerging out of recent U.S.-China trade talks has also led at least one firm to pare back its expectations for further tariff escalation. Goldman Sachs analyst Alec Phillips wrote in a note to clients that he believed “tariffs on imports from China have likely peaked,” and that levies would likely remain at current levels through 2020. Assuming the first-phase trade agreement gets signed, Phillips expects the White House will cancel tariffs set to take effect December 15.
Recent upbeat U.S.-China trade remarks, as well as some estimates-beating economic data and a fresh injection of monetary policy stimulus last week, have combined to push risk assets higher, breaking them free of the weight of uncertainty from earlier this year.
“A confluence of better-than-expected economic data, Q3 earnings results and a third 25-basis point rate cut by the Federal Reserve Board along with some encouraging missives surrounding trade talk progress helped push stocks higher stateside and worldwide last week,” John Stoltzfus, Oppenheimer equity strategist, wrote in a note.
For now, the current economic landscape “persists strong enough for positive data points to continue to offset negative data points when they cross the transom and overwhelm bearish projection pointing instead to an underlying resilience of an economy that is predominantly dependent on the consumer rather than on manufacturing in midst of a global trade war,” he added.
STOCKS: McDonald’s CEO ousted, Under Armour under investigation
McDonald’s (MCD) board of directors voted to oust CEO Steve Easterbrook over “poor judgment involving a recent consensus relationship with an employee,” the company said in a statement Sunday. Chris Kempczinski, previously president of McDonald’s USA business, was named CEO, effective immediately.
Easterbrook is credited with having spearheaded the fast food company’s push into digital ordering and delivery, as well as boosting value menu offerings to appeal to customers. The stock has risen 96% since March 2015 when Easterbrook took over as CEO, more than double the return of the S&P 500 during the same period. Shares of McDonald’s, a Dow component, fell 2.5% Monday morning.
Under Armour (UAA) shares sank 15% around market open after the workout apparel company disclosed it has been under investigation in a federal accounting probe by the U.S. Department of Justice and Securities and Exchange Commission for the past two years.
The announcement outweighed better-than-expected third-quarter results, with earnings of 23 cents per share on revenue of $1.43 billion each topping estimates. However, Under Armour also reduced its full-year sales guidance, and now sees revenue growth of just 2% for the year, down from its previous guidance for between 3-4%.
Saudi Aramco, the world’s most profitable company, announced plans Sunday to publicly float shares on the Tadawul stock exchange in Riyadh, at least temporarily putting aside previously reported plans for a foreign listing for the Saudi company. The company, which brought in $111 billion in net income last year, is reportedly being valued north of $1 trillion by banks, even as the Crown Prince Mohammed bin Salman seeks a valuation of around twice that.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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