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Stocks rise as Trump signals China trade flexibility

Stocks extended gains after President Donald Trump signaled he may be open to extending a deadline on U.S.-China trade war ceasefire.

The S&P 500 (^GSPC) rose 0.3%, or 8.3 points, as of market close, with the Energy sector leading advances as West Texas Intermediate oil prices ended higher by 1.51%, the largest daily gain since Feb. 1. The S&P 500 closed at a price of 2,753.03, the highest level since December 3.

The Dow (^DJI) closed higher by 0.46%, or 117.51 points, while the Nasdaq (^IXIC) rose 0.08%, or 5.76 points.

Trump on Tuesday told reporters from multiple outlets that he would be open to pushing back the current early March deadline to reach a trade deal with China. The administration was previously expected to raise the rate on tariffs on billions of dollars-worth of Chinese goods if an agreement was not worked out by the beginning of March.

Trade discussions continue this week, with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin participating in talks with Chinese officials. Mnuchin told reporters on Wednesday in Beijing “So far, so good,” with regard to trade talks, according to Reuters.

Trade-related headlines have continued to whipsaw investors, with movements in the industrials-heavy Dow especially reactive to the Trump administrations’ communications over the likelihood of a deal with China.

“U.S.-China trade is one near-term source of lingering macro uncertainty. Investors have expressed skepticism about whether both parties can reach a resolution by the March 1 deadline,” Goldman Sachs analyst Ryan Hammond wrote in a note. “Headlines about the ongoing trade war could represent a short-term catalyst for a broad-based move in U.S. equities. In addition, any meaningful surprises (positive or negative) in global growth data would likely lift the importance of market beta for stock returns.”

The impact of tariffs on U.S. companies has been well-telegraphed in many corporations’ recent earnings reports and calls with analysts. A UBS Evidence Lab study published Monday found that of 500 U.S. companies surveyed during the fourth quarter of 2018, 75% had taken at least one action in response to tariffs. These included raising prices to offset higher costs, substituting products, shifting supply chains, moving production facilities or front-loading imports or exports. Based on UBS’s findings, the companies in the Tech and Industrials sector have reacted the most notably to tariffs.

However, some CEOs and CFOs included in the survey did see potential benefits from protectionist policies, with 58% of respondents expecting a positive impact on domestic investment.

Elsewhere, concerns that the U.S. would be partially shut down again at this end of this week have been further assuaged. CNN reported Wednesday morning that President Donald Trump plans to sign a border security deal that congressional negotiators had said they reached earlier this week. The tentative deal would include only a portion of the $5.7 billion Trump has previously demanded for border security.

Trader Robert Charmak, center, works on the floor of the New York Stock Exchange, Tuesday, Feb. 12, 2019. U.S. stocks are gaining in early trading after U.S. lawmakers reached a tentative deal to avoid another costly government shutdown. (AP Photo/Richard Drew)

Later today, macroeconomic observers will also receive commentary from several Federal Open Market Committee members, who will deliver public remarks Wednesday. These comments come following the latest reading for the January consumer price index. The core consumer price index, which registered a 2.2% pace of increase over the past 12 months, serves as the Fed’s preferred inflation indicator. As of the Fed’s most recent monetary policy statement January 30, central bank officials characterized inflation pressures as “muted.”

Today’s lineup of FOMC speakers include the Cleveland Feed’s Loretta Mester, the Atlanta Fed’s Raphael Bostic and the Philadelphia Fed’s Patrick Harker. Mester leans more hawkish than the typically dovish Harker and Bostic, and all three are non-voting members in 2019.

ECONOMY: U.S. consumer prices unchanged in January, core CPI registers 2.2% increase over last year

The headline consumer price index was unchanged in January from the month prior, according to a report Wednesday from the Bureau of Labor Statistics, falling below expectations of a 0.1% rise in CPI. December’s CPI reading was upwardly revised to also show no change from the month prior. Year-over-year, CPI increased 1.6% in January, versus a 1.5% pace of increase expected.

A third consecutive month of declines in the energy index weighed on headline CPI and offset increases in the food index, the BLS noted.

Core CPI, which excludes volatile food and energy prices, rose at a 2.2% pace over the past 12 months, or unchanged from December’s rate.

The U.S. budget deficit widened to $319 billion between October and December, a 42% increase over the same three-month period the year prior, according to a statement Wednesday from the Treasury Department.

STOCKS: Johnson & Johnson acquires surgical robotics company, Levi Strauss files for IPO

Johnson and Johnson (JNJ) has entered an agreement to acquire Auris Health Inc., a surgical robotics firm, for about $3.4 billion in cash, according to a press release Wednesday. Additional contingent payments of up to $2.35 billion could be made to Auris Health based on “reaching certain predetermined milestones,” the statement noted. Auris Health is the developer of technology focused on lung cancer treatment, and has FDA approval for its platforms used for bronchoscopic diagnostic and therapeutic procedures. J&J’s medical devices arm last year acquired Orthotaxy, a developer of robotics-assisted surgery technology, and has a robotic surgery company it formed in tandem with Alphabet-owned (GOOGGOOGL) Verily Life Sciences.

Teva Pharmaceuticals (TEVA) delivered earnings for the fourth quarter that fell short of consensus estimates and provided disappointing guidance for the full-year 2019. The Israel-based generic drug manufacturer posted non-GAAP earnings of 53 cents per share, below Bloomberg-compiled estimates of 56 cents per share. Quarterly revenue was $4.56 billion, a 16% decrease from the fourth-quarter of 2017, which the company said was due in part to generic competition for Copaxone. The company said it expects to post sales of $17 billion to $17.4 billion for the fiscal year 2019, along with non-GAAP EPS of between $2.20 to $2.50 – coming in below analysts’ consensus earnings expectations.

Levi Strauss has filed for an initial public offering and plans to list on the New York Stock Exchange under the ticker “LEVI,” according to a company statement Wednesday. The jean-maker added that the number of shares expected to be offered and the price range have yet to be determined. Shares of peer clothing companies including American Eagle Outfitters (AEO), Abercrombie & Fitch Co. (ANF), The Gap (GPS) and Urban Outfitters (URBN) declined Wednesday morning ET following the news.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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