Stocks Climb as Trade Hopes Outweigh Bank Concerns: Markets Wrap

Stocks were mostly higher but gave back some early gains as investors balanced some tech skepticism with the possibility of progress in U.S.China trade talks. The dollar rose, Treasuries were steady and crude climbed toward $50 a barrel on expectations the market will be tightened by OPEC’s output cuts.

The S&P 500 was up slightly after gaining almost 1 percent at the open. And the Dow Jones Industrial Average gained around 150 points, down from a 250-point rise earlier. Banks, insurers and diversified financial firms struggled, while transportation stocks, telecommunications services companies and automakers paced the gainers. Boeing Co. helped lift large-caps with a strong fourth-quarter delivery report. PG&E Corp. was the biggest decliner in the S&P 500 amid reports that the California utility giant is considering bankruptcy. Meanwhile, the Nasdaq gauges were held back weakness in semiconductors.

“Talks with China are going very well!” Trump tweeted on Tuesday morning as the countries wrapped up the meetings. However, other reports indicated that the two weren’t closing in on a trade deal.

“Any incremental headlines that we receive that imply U.S.China trade relationships are going better is going to substantially help current sentiment,” said Frances Donald, the head of macro strategy at Manulife Asset Management in Toronto. “From a forward looking perspective, if expectations about USChina trade wars diminish then this will encourage a risk-on environment.”

In Asia, the MSCI Asia Pacific Index dipped and the MSCI China Index was essentially unchanged. Japanese shares and Hong Kong stocks rose, though equities slid in South Korea. Meanwhile, European shares shrugged off unexpectedly weak German industrial production numbers and worsening euro-area consumer confidence to climb on strength among retailers and carmakers. The euro remained lower after the data.

Although 2019 is off to an optimistic start, risks remain. The outcome of U.S.China trade relations still hangs in the balance. Meanwhile, parts of the American government are shut down with lawmakers unable to agree on a budget proposal that President Donald Trump will sign. Trump will deliver a prime-time televised address on Tuesday evening about his demand for a wall along the Mexican border, which is at the heart of the dispute. And in Europe, machinations over Brexit continue.

Investors are happy to go with the positive trend in the current environment but remain wary of sharp downside reactions given the moves we’ve seen over the last few weeks and months,” Nick Twidale, chief operating officer at Rakuten Securities Australia, wrote in a note. “Traders are still very much aware that the various geopolitical factors that have been so prevalent in influencing market moves over the last 12 months are still relevant.”/bloomberg.com

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