U.S. markets closed at their highest levels for 2019 on Tuesday. Stocks soared after a temporary deal to provide funding for a U.S. – Mexico barrier was reached between Republican and Democratic lawmakers. Further, trade negotiations between the United States and China entered its second day.
The Dow Jones Industrial Average (DJI) increased 1.5%, to close at 25,425.76. The S&P 500 increased 1.3% to close at 2,744.73. The tech-laden Nasdaq Composite Index closed at 7,414.62, gaining 1.5%. The fear-gauge CBOE Volatility Index (VIX) decreased 3.6% to close at 15.40. Advancers outnumbered decliners on the NYSE by a 3.34-to-1 ratio. On Nasdaq, a 3-to-1 ratio favored advancing issues.
How Did the Benchmarks Perform?
The Dow amassed 372.7 points to end the session in the positive territory. Gains for the 30-stock index were led by a surge in shares of trade sensitive stocks such as Caterpillar CAT and 3M MMM, with the two stocks gaining 2.9% and 2.8%, respectively. The broad-based rally in industrial stocks was supported by optimism surrounding the U.S.- China trade talks which are underway.
The S&P 500 added 34.9 points to also close in the green. The broad-based index broke above its 200-day moving average for the first time since Dec 3. Of the 11 major segments of the S&P 500, 10 ended in the positive territory, with materials, financials and industrial stocks leading the advancers. The Materials Select Sector SPDR ETF (XLB), Industrial Select Sector SPDR ETF (XLI) and Financial Select Sector SPDR ETF (XLF) gained 2.2%, 1.6% and 1.5%, respectively.
Meanwhile, bank stocks also posted a broad-based rally on Tuesday, thereby boosting SPDR S&P Bank ETF (KBE) by 1.2%. Shares of Goldman Sachs GS, Citigroup C, Morgan Stanley MS, Bank of America BAC and J.P. Morgan Chase JPM rose 1.7%, 1.7%, 2.3%, 1% and 1.7%, respectively.
The Nasdaq also gained 106.7 points to finish in the green. Moreover, the investors also closely followed the latest deluge of fourth quarter earnings as the season entered into its final phase.
Temporary Deals Helps Avert Government Shutdown
Republican as well Democratic Congressional leaders reached a joint agreement to allow funding for barriers along the U.S.- Mexico border. This prevented another government shutdown. The Republicans agreed to far less an amount than initially demanded in a bid to avoid a shutdown. A sum of $1.4 billion was approved by Congress for building 55 miles of new fencing instead of a concrete wall.
President Trump had demanded $5.7 billion for the construction of a 215-mile-long concrete border across the border. Speaking from the White House he stated, "I can't say I'm happy. I can't say I'm thrilled." Even though the deal has temporarily been approved, it is still pending Trump’s agreement. As a matter of fact, Trump has not stated he will reject the proposal. Such developments boost market sentiment.
Expectations of Positive Outcome fromTrade Talks Boost Markets
Trade negotiations between the United States and China entered the second day on Tuesday. Both the countries are hopeful that this fresh round of negotiations would result in breakthrough in the ongoing tariff war between the countries.
While such discussions have been termed as only working-level, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer are expected to arrive in Beijing on Thursday for the next level of talks. Investors were also hopeful of positive developments from such negotiations.
On the economic news front, the National Federation of Independent Businesses small business index slid 3.2 points to hit 101.2. This marked its lowest level since the run up to the 2016 presidential elections.
The Labor Department reported that the number of job openings in the United States hit an all-time high of 7.3 million in the month of December. Further, the number of American quitting their current jobs remained flat at 2.3%
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