Stocks Shoot to Record Highs on News of China Trade Deal
Wall Street reacted to news that the U.S. and China have reached the first part of a trade deal by roaring to record highs on Monday.
The Dow Jones Industrial Average rose 100.51 points to close at 28,235.89. The S&P 500 gained 0.7 percent and the Nasdaq Composite jumped 0.9 percent, according to CNBC.
President Donald Trump exulted in yet another Dow Jones record during his term in office.
“New Stock Market high! I will never get bored of telling you that – and we will never get tired of winning!” Trump tweeted Monday, in the middle of the stock trading day.
New Stock Market high! I will never get bored of telling you that – and we will never get tired of winning!
— Donald J. Trump (@realDonaldTrump) December 16, 2019
Analysts said the news was a shot in the arm for the American economy.
“This has been the thing that, personally, I’ve been looking for all year,” Kim Forrest, founder of Bokeh Capital, told CNBC in reference to the trade deal. “Increased trade is going to allow companies to start spending again on capital expenditures. That had been frozen, and most of most of those are technology purchases.”
The U.S. and China announced Friday that phase one of a trade deal will take place, with a formal signing to occur in January.
Although the U.S. will keep in place a 25 percent tariff on about $250 billion of goods imported from China, the Office of the U.S. Trade Representative said tariffs on $120 billion of Chinese goods will drop to 7.5 percent, according to NBC News.
The agreement will delay a 15 percent tariff on Chinese goods that would have taken effect on Sunday.
…..The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election. This is an amazing deal for all. Thank you!
— Donald J. Trump (@realDonaldTrump) December 13, 2019
Under the deal, China will buy $200 billion in U.S. goods and up to $40 billion in American agricultural exports. China has pledged to make its “best efforts” to buy $50 billion in agricultural goods.
The recently-concluded ‘phase one’ U.S.-China trade deal to see U.S. exports nearly double over the next two years, said U.S. Trade Representative Robert Lighthizer https://t.co/ggul46iD2F pic.twitter.com/rWQbaMsaYP
— Reuters (@Reuters) December 16, 2019
“This should put to rest for the time being the ‘trade war’ volatility factor in markets, which has become a dominant theme over the past year and a half,” Eleanor Olcott, a China policy analyst at TS Lombard, told CNBC. “This brief interlude of calm for the China-US relationship presents some investment opportunities.”
Others said the optimism comes from hopes that phase one really is a first step to boosting trade between the two countries.
“We may have reached the point of ‘peak tariffs’ and this deal could be the start of a series of phased rollbacks, which could unlock further upside for equity markets, driven by an improvement in business confidence and a recovery in investment,” Mark Haefele, chief investment officer at UBS Global Wealth Management, told clients in a note, Reuters reported.
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