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Stocks Rally on Earnings, China Trade Optimism: Markets Wrap

Vildana Hajric and Olivia Rinaldi
Stocks Rally on Earnings, China Trade Optimism: Markets Wrap

(Bloomberg) -- U.S. stocks closed higher, sending the benchmark S&P 500 Index back above the 3,000 level, as investors assessed a batch of strong earnings and signs of progress in trade talks with China. Treasuries fell and the dollar rose.

After the market closed, shares of Amazon, Alphabet and Facebook declined more than 1% after Dow Jones reported that the Justice Department is opening a broad antitrust review into whether dominant technology firms are unlawfully stifling competition. In major earnings, Texas Instruments rose after the company gave stronger-than-predicted sales and profit forecasts for the current quarter. Chipotle rose as sales beat estimates.

The S&P 500 had climbed for a second day as Coca-Cola reached a record high, while United Technologies jumped after the duo posted earnings that topped estimates. PulteGroup, Zions Bancorp and Whirlpool all tumbled after results disappointed. Strong earnings helped the Stoxx Europe 600 gain, with upbeat reports from heavyweights including UBS, Santander, Hermes and AMS.

“One of the biggest risks is that people underestimate how much the U.S. companies actually rely on international and emerging markets for growth,” said Brian Kersmanc, a senior investment analyst at GQG Partners and deputy portfolio manager on the GQG International Strategy. “The lines between developed market, emerging market, and U.S. and international are blurring immensely.”

Equities had extended gains midday after Blooomberg reported that U.S. Trade Representative Robert Lighthizer is set to travel to China next Monday for the first high-level, face-to-face trade negotiations between the world’s two biggest economies since talks broke down in May.

“We’re starting to see perhaps both sides are building more good faith for continuing negotiations,” said Michael Reynolds, investment strategy officer at Glenmede Trust Co. in Philadelphia. “It seems like they’re making progress, which is good, and the market applauds something like that.”

Elsewhere, the British pound stayed lower after Boris Johnson was officially named by the Conservative Party as Prime Minister Theresa May’s replacement.

Oil gained amid the optimism on trade. Futures in New York shook off their earlier malaise and shot up 1% to close trading.

Here are some key events coming up:

Earnings season rolls on with companies including Amazon.com, Alphabet, Unilever, Caterpillar, McDonald’s and Boeing still to report this week.Thursday brings the European Central Bank policy decision. Economists widely expect officials to signal their readiness to cut interest rates and potentially broaden stimulus. Some see the chance of an immediate rate cut. ECB President Mario Draghi holds a briefing afterward.

These are the main moves in markets:

Stocks

The S&P 500 Index rose 0.7% as of 4:02 p.m. New York time. The Nasdaq Composite Index increased 0.6% and the Dow Jones Industrial Average climbed 0.7%.The Stoxx Europe 600 gained 1%, the third straight increase.The MSCI Emerging Market Index was little changed.The MSCI Asia Pacific Index rose 0.3%.

Currencies

The Bloomberg Dollar Spot Index rose 0.4%, the third consecutive gain.The euro declined 0.5% to $1.1148, while the yen weakened 0.4% to 108.25 per dollar. The British pound fell 0.3% to $1.2435, the third straight decline.The MSCI Emerging Markets Currency Index dropped 0.2%.

Bonds

The yield on 10-year Treasuries rose 2 basis points to 2.07%.Germany’s 10-year yield was little changed at -0.36%.Britain’s 10-year yield fell 2 basis points to 0.69%.

Commodities

West Texas Intermediate rose 1.3% to $56.93 a barrel. Gold fell 0.6% to $1,417 an ounce. The Bloomberg Commodity Index gained 0.3%.

To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Olivia Rinaldi in New York at orinaldi1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka

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