Wall Street rallied for the fourth successive day owing to positive developments on the trade front and Fed Chair’s indication of maintainingcaution on further interest rate hikes.However, partial government shutdown remained a concern. All three major stock indexes ended in the green.
The Dow Jones Industrial Average (DJI) closed at 23,879.12, gaining 0.4%. The S&P 500 Index (INX) also rose 0.4% to close at 2,584.96. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 6,957.08, climbing 0.9%. A total of 8 billion shares were traded on Wednesday, lower than the last 20-session average of 9 billion shares. Advancers outnumbered decliners on the NYSE by 2.28-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.91-to-1 ratio. The CBOE VIX decreased 2.5% to close at 19.98, its lowest level in a month.
How Did the Benchmarks Perform?
The Dow ended in positive territory for the fourth successive day. Notably, 19 components of the 30-stock blue-chip index finished in the green while the remaining eleven closed in the red. The S&P 500 closed in positive territory for the fourth consecutive day,its longest winning streak since Sep 14. The Energy Select Sector SPDR (XLE) and Technology Select Sector SPDR (XLK) are major gainers with 1.6% and 1.3%, respectively. Notably, eight out of a total 11 sectors of the benchmark index closed in the green while three finished in the red.
The tech-heavy Nasdaq Composite also ended in the green after rallying for four straight days, due to strong performance by large-cap tech stocks. Shares of Facebook Inc. FB and Apple Inc. AAPL surged 1.2% and 1.7%, respectively. Both stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Positive Developments on Trade War Front
The three-day meeting between mid-level delegations of the United States and Chins ended on a positive note although broad-based solutions to tariff conflicts are yet to reach. This meeting at least laid the foundation for further negotiations to form a permanent deal to resolve the nine-month old trade disputes between the two largest trading nations of the world.
The U.S. Trade Representative's office said that China assured to import "a substantial amount" of agricultural, energy and manufactured goods and services from the United States. Talking about the meeting, Ted McKinney, U.S. Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs, said “"It's been a good one for us….I think they went just fine." China's Commerce Ministry also held the latest round of trade talks with the United States as extensive and a step forward for the resolution of each other’s' concerns.
Notably, on Dec 1, U.S. President Donald Trump and his Chinese counterpart Xi Jinping reached an initial agreement to find a permanent solution to the trade-related conflict between the two countries. The truce will be valid for the next 90 days during which the two countries will try to solve bilateral trade conflicts. Several economists have expressed concerns of a global economic slowdown in 2019 owing to lingering trade conflict between these two largest trading nations of the world.
Fed Signals Dovish Monetary Stance
On Jan 9,the Fed released its FOMC minutes stating that the central bankcould be patient about future interest rate increases. The Fed officials are “less clear” about their future course of action regarding hike in benchmark interest rate. Several Fed officials have argued that lack of inflationary pressure in the U.S. economy does not call for a tight monetary policy which may act as a hindrance for steady state growth of the economy.
Earlier on Jan 4, Fed Chairman Jerome Powell said that the central bank will adjust interest rate if it witnesses any sort of unexpected fluctuations in the U.S. economy. The Fed will also reconsider its balance sheet reduction policy in order to keep interest rate market friendly.
Partial Government Shutdown: a Concern
On Jan 9, President Donald Trump tweeted that his meeting with House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer related to ongoing partial government shutdown was "a total waste of time." The United States is facing partial government shutdown for last 18 days owing to disagreement between Trump and Democratic lawmakers over funding for a U.S.-Mexico border wall.
Some government employees are likely to miss their first paycheck this week as a result of this shutdown. However, the Internal Revenue Service has announced on Jan 7 that it will process income tax refunds even during the shutdown period.
Stocks That Made Headline
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