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US Stocks Rise, Trade War Fears Ease on US-China Negotiation

US Stocks rose on Monday as reports that the United States and China were willing to negotiate on tariffs. It eased fears about a potential trade war between 2 countries.

The Dow Jones industrial average advanced 669.40 points to 24,202.60, recording its biggest 1-day percentage gain since August 2015.

The S&P 500, which last week suffered its worst weekly performance in more than 2 years, added 2.72% to end at 2,658.55. The Nasdaq Composite boosted 3.26% to finish at 7,220.54.

the dow jones building in black and white
Dow Jones gained 669.40 points, hitting its biggest one-day gain since August 2015.

Technology US stocks led gains on the major indexes. Microsoft surged 5.8% after Morgan Stanley’s price target increase on the stock. The company could hit $1 trillion in market value with growing public adoption of the cloud and improving margins, said the investment bank.

Intel jumped 4% after Raymond James upgraded the stock to “market perform.”

However, Facebook fell 2.4% after the US Federal Trade Commission disclosed an investigation into the social media giant. It has come under fire for data privacy issues.

“They’ll have to explain to users what they’re going to do and that may stop the bleeding,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

“But in the short term, everyone realizes that it’s a self-feeding loop as more people leave, so are more advertisers.”

US Stocks ended Friday’s session deep in the red on Friday. The Dow losing more than 400 points by the close, which was the lowest level since November and finishing in correction territory, as it was 11.6% lower from its 52-week high. The S&P 500 ended Friday’s session just outside of correction territory.

“Friday got a little overdone on fears of a trade war,” said JJ Kinahan, chief market strategist at TD Ameritrade. “I do not think this means ding dong the witch is dead. We could see a reversal.”

US-China Negotiations

On Monday, Peter Navarro, a White House trade advisor, said the US is “talking with the Chinese.” He was “hopeful that China will work with us” to help close the US’s $375 billion trade deficit. Over the weekend, Treasury Secretary Steven Mnuchin told Fox News the US is trying to reach a deal with China.

Meanwhile, China’s government said it is open to negotiating with Washington. That announcement followed a news report indicating that US officials have submitted a list of market-opening requests.

Further, The Wall Street Journal reported that the US and China have “quietly started negotiating” and that Mnuchin is considering a trip to Beijing for talks.

Last week, President Donald Trump signed an executive memorandum that would inflict tariffs on Chinese imports of up to $60 billion. China retaliated with their own set of levies, drawing up a list of 128 US products that could be potential retaliation targets.

The latest concern on Wall Street is that both countries have too much to lose in a trade war, and will work to avoid such an outcome.

“There’s too much at stake,” said Joe Quinlan, chief market strategist at US Trust. “Policy makers understand that the best and fastest way to harm their constituents is to start a trade war and deny voters low-cost goods produced from around the world while tanking global financial markets.”

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