U.S. stocks rallied to the close late in the session Wednesday, with Wall Street equity benchmarks jumping to new heights following the announcement of a pact to ease trade tensions between the U.S. and the European Union after an important tête-à-tête between President Donald Trump and the EU’s Jean-Claude Juncker in Washington.
How did the main benchmarks fare?
The S&P 500 SPX, +0.91% SPX, +0.91% surged by 25.67 points, or 0.9%, to 2,846.07, a rise sufficient to officially yank the broad-market benchmark out of correction territory, which it entered on Feb. 8. A correction is usually defined as a fall from a recent peak of at least 10%. A climb of 10% from a closing low in correction is typically viewed by market technicians as ending an asset’s corrective phase. The late-day rally was broad, with all but one of the S&P 500’s 11 sectors ending in positive territory. Telecommunications ended down 2.9%, while tech led gainers, jumping 1.5% higher.
The Dow Jones Industrial Average DJIA, +0.68% rose 172.16 points, or 0.7%, to 25,414.10. Earlier in the session, the blue-chip average’s was weighed down by a sharp slide in industrials giant Boeing Co., one of its most influential stocks, which fell after releasing results and has been sensitive to trade tensions.
The Nasdaq Composite Index COMP, +1.17% gained 91.47 points, or 1.2%, to 7,932.24 to end at a fresh record, marking its 25th all-time high of 2018.
What drove the markets?
During a news conference in the White House Rose Garden, Trump said that the U.S. and the EU will maintain a “close relationship” with “strong trade relations.” “Both of us will win,” he said, at the late-afternoon news conference with Juncker. Trump said Washington and Europe would “work together toward zero tariffs, zero non-tariff barriers, zero subsidies on non auto-industrial goods.”
The eurozone and Washington also agreed to lower industrial tariffs on both sides and increase liquefied natural gas and soybean exports to Europe, with an agreement to avoid tariffs on European auto makers also in the works, according to the Wall Street Journal.
The upbeat meeting between the leaders helped to alleviate, for the moment, simmering tensions in the U.S. that protectionist policies advocated by Trump’s administration, and tit-for-tat battles with Europe, North America and China, could damage the global economy and more severely rattle equity markets.
Thus far in July, second-quarter earnings have been the predominant driver for market’s gains, with strong growth in earnings and sales, and a high percentage of companies beating analyst expectations.
A little less than one third of companies in the S&P 500 have reported quarterly results, with earnings from those constituents up 20%.
That dynamic had helped to offset some of the concerns about a potential global trade war.
What were strategists saying?
“With the economy picking up steam thanks to the benefits of fiscal policy, this is one more worry that was holding back stocks out of the way. Investors can now focus on what should be a very strong corporate earnings season,” said Ryan Detrick, senior market strategist for LPL Financial.
“In particular, easing trade tensions on an important sector like autos is positive for both counterparts,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.
“The agreement to not impose new tariffs while negotiations take place is a signal that real progress could happen. In turn, markets moved away from haven assets with the 10 year Treasury yield rising 3 basis points and the S&P 500 gaining a half percent on the news. Any news considered to be progress on the trade front will likely be embraced by investors as a positive signal for risk assets,” Ripley said.
Which stocks were in focus?
Dow component Boeing BA, -0.66% reported adjusted second-quarter earnings that beat expectations, along with revenue that was above forecasts. It also raised its 2018 revenue outlook. However, share closed 0.7% lower, paring more severe losses, as its commercial airplanes division came up short on sales.
General Motors GM, -4.64% tumbled 4.6% after posting revenue that fell short of expectations and giving a downbeat profit outlook.
Shares in AT&T Inc. T, -4.51% fell 4.5% after the telecom late Tuesday reported second-quarter results that beat expectations, but saw sales fall from a year ago.
Coca-Cola Co. KO, +1.83% reported adjusted second-quarter earnings that beat expectations and sales that topped forecasts. Shares rose 1.8%.
United Parcel Service Inc. UPS, +6.90% rallied 6.9% after the package shipper reported second-quarter earnings and revenue that beat expectations.
Tupperware Brands Corp. TUP, -16.38% reported second-quarter revenue that missed expectations and gave weak third-quarter guidance. Shares tumbled 16.4%.
Texas Instruments Inc.’s stock TXN, -0.51% reversed earlier loss to edge back by 0.5%. The company’s results, release late Tuesday, topped Wall Street’s estimates, but came as no surprise, having been telegraphed last week along with the chief executive’s departure announcement.
HCA Healthcare Inc. HCA, +9.22% jumped 9.2% after it reported second-quarter profit and revenue beats and upbeat 2018 guidance.
Fiat Chrysler Automobiles NV FCAU, -11.83% FCA, -15.50% cut its full-year outlook and reported a drop of 35% in its second-quarter earnings, sending U.S.-listed shares down 0.9%. The auto maker could also be in focus following the death of former CEO Sergio Marchionne, which comes just days after it appointed Mike Manley as its new CEO, in an unexpected move to replace Marchionne.
Economic reports on tap
A June reading on new home sales showed 631,000 homes sold, below forecasts expecting 660,000 homes sold.
What are other markets doing?
European stocks SXXP, -0.26% closed mostly lower, while Asian markets closed mixed.
Gold GCQ8, -0.01% settled modestly higher and oil futures CLU8, +0.07% rose, while the ICE U.S. Dollar Index DXY, -0.07% retreated.
