Stocks jump on signs of trade talk progress
U.S. equities tracked a broad global rally and closed higher on Wednesday as a slew of reports pointed to a softening of trade tensions.
The S&P 500 (^GSPC) rose 0.54%, or 14.29 points, as of market close, with the consumer discretionary sector leading advances. The Dow (^DJI) increased 0.64%, or 157.03 points, while the Nasdaq (^IXIC) rose 0.95%, or 66.48 points.
Stocks added to gains following a Wall Street Journal report that China is planning to open up access to foreign companies and move away from its original staunch “Made in China 2025” plan.
Earlier, President Donald Trump said on Tuesday in an interview with Reuters that China was buying a “tremendous amount” of U.S. soybeans, a commodity that has been at the center of trade disputes. Trump added that Washington and Beijing were already in trade talks by telephone and that more meetings are between envoys of the two countries are likely.
This comes as China is preparing to cut tariffs on U.S.-made cars to 15% from 40%, according to a Bloomberg report, in another move indicating progress toward a resolution to the U.S.-China trade war.
Investor optimism also rose after Meng Wanzhou, CFO of China’s Huawei Technologies, was released on bail in Canada. The move lifted a layer of certainty around the fate of Meng, an executive for a tech company at the heart of President Xi Jinping’s blueprint to become a leader in strategic industries. The arrest had been viewed as a threat U.S.-China relations, and Trump said he would be willing to intervene in the Huawei trial in order if doing so would help secure a trade deal.
The capricious political environment has recently put exceptional pressure on markets, many analysts have noted.
“Once upon a time, the job of an economist was to talk about economics. Now, most of the job seems to be trying to second-guess what politicians will do next,” Paul Donovan, global chief economist for UBS Wealth Management, said in commentary Wednesday. “President Trump was sounding conciliatory on trade yesterday, allowing equity markets to rally. Rising trade taxes are particularly damaging to equities, so any concessions from Trump will inevitably help markets”
STOCKS: Tencent Music debuts on the NYSE
Tencent Music (TME) opened on the New York Stock Exchange at $14.10 per share after the company’s initial public offering was priced at $13. The music streaming arm of Chinese conglomerate Tencent Holdings raised nearly $1.1 billion in its U.S. IPO, giving the company an implied valuation of more than $21 billion. Tencent Music, which owns the four largest music applications in China, had more than 800 million total unique monthly active users in the second quarter of 2018, it disclosed in a filing. Shares of Tencent Music closed higher by 7.88% to $14.12 per share.
Shares of Under Armour (UAA) slid after the fitness apparel company offered a disappointing growth outlook, especially for sales in its key North American market. The company said in an investor day presentation that it sees annual growth in the low-single digits from 2020 to 2023 in North America. The weak guidance comes amid reports that two of the company’s top marketing executives were released from the company following an internal review of departmental spending. Shares of Under Armour fell 10.47% to $19.81 each as of market close.
Dell received shareholder approval to return to the public markets for the first time in five years, the company said in a statement. The computer company will buy back the VMWare tracking stock (DVMT) it took up in the wake of its EMC acquisition for $120 per share for a total of $23.9 billion. The move will help simplify Dell’s capital structure and add liquidity to the stakes of key shareholders including private equity firm Silver Lake, which helped bring Dell private in 2013 in a $24 billion deal. Dell will return to being publicly traded on December 28.
Apple (AAPL) suppliers are considering moving its iPhone production away from China if tariffs on imports rise to 25%, Bloomberg reported, citing unnamed people familiar with the matter. Although U.S. tariffs on China-made products do not currently apply to smartphones, Trump suggested last month that the range of affected devices could expand to include smartphones and laptops. Recently, RBC analyst Amit Daryanani said that a 25% tariff could translate to a $2.50 reduction in Apple’s earnings per share.
Shares of Dave & Buster’s (PLAY) slumped after the company reported disappointing financial results for the third quarter. The company’s same-store sales 1.3% in the quarter versus a 0.7% pace of decline expected. However, the entertainment venue company delivered earnings and revenue above consensus estimates, with earnings of 30 cents per share and revenue of $282 million, versus $277 million expected. Shares of Dave & Busters fell 7.88% to $47.01 each as of market close.
ECONOMY: November’s core CPI increases in-line with expectations
The core Consumer Price Index, a key metric of U.S. inflation that excludes volatile food and energy costs, rose 0.2% month-over-month and 2.2% over last year in November, matching consensus expectations. The broader CPI was unchanged in November, according to the Bureau of Labor Statistics. A 4.2% decrease in the gasoline index in November offset increases in other indices including shelter and used cars and trucks.
The results show “significant, but offsetting, month-to-month movements in key core components,” Ian Shepherdson, chief economist of Pantheon Macroeconomics, wrote in a note. Near-term upside inflation risks are “very limited,” with core CPI potentially sliding back below the Federal Reserve’s 2% inflation target in the coming month, he added.
“This does not mean the Fed can relax, though, because the tightening labor market is a real medium-term threat, and zero real short-term interest rates won’t ease the pressure,” Shepherdson said.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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