U.S. stocks rose again Thursday, with the major benchmarks reaching new record intraday highs, following the signing of a formal trade truce between the U.S. and China, completed at a White House signing ceremony on Wednesday.
Investors were also parsing a batch of healthy U.S. economic reports including those on retail sales and jobless claims and a fresh batch of quarterly results, headlined by those from Morgan Stanley.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.57% gained 162 points, or 0.6%, to 29,192, with the blue-chip index extending its three-day run-up after closing at a record high, above the psychologically significant 29,000 a day ago.
The S&P 500 index SPX, +0.56% advanced 18 points, or 0.6%, to 3,308 and the Nasdaq Composite index COMP, +0.64% added 60 points, or 0.7%, at 9,319.
On Wednesday, the Dow rose 90.55 points, or 0.3%, at 29,030.22, the S&P 500 index gained 6.14 points, or 0.2%, to close at a record at 3,289.29, while the Nasdaq Composite Index gained 7.37 points, or 0.1%, to close at 9,258.70.
What’s driving the market?
Under the terms of the 96-page, phase-one trade agreement signed at White House on Wednesday, China is slated to purchase $95 billion more in U.S. commodities than in 2017, and roughly $100 billion more in manufactured goods and services, but investors harbor some doubts that the agreement will lead to a lasting according, as the world’s two largest economies move to the next phase of negotiations.
Tom Essaye, president of the Sevens Report, wrote in a Thursday note to clients that there was little “sell the news” reaction to Wednesday’s deal, because “the day’s events largely met expectations that markets had already priced in.”
He added that investors were also heartened by the release of the full text of the agreement and by comments by U.S. Treasury Secretary Steve Mnuchin that further tariff reductions could come in stages, in a scenario where there is “phase two A, phase two B and phase two C.” The promise of a multistage process “gives the administration the avenue for further tariff reduction without a full phase two agreement,” he wrote.
“Phase one is behind us and it met market expectations,” he continued. “Now the very real question of whether phase one results in an uptick in economic growth lies in front of us, and the truth is it’s unclear.”
One question is whether China can actually meet the lofty purchase goals outlined in the deal. While the agreement stipulated that China “shall” purchase roughly $200 billion in incremental goods and services over the next two years, it also stated that ““the parties acknowledge that purchases will be made at market prices based on commercial considerations.”
A sign of skepticism was seen in commodity futures markets. Despite the promise of much higher purchases of agricultural products, on the Chicago Board of Trade soybean SH20, -0.32% and corn CH20, -2.39% futures prices fell Wednesday and again on Thursday morning.
In other trade news Thursday, the U.S. Senate overwhelmingly approved the U.S.-Mexico-Canada Agreement, sending the pact to President Donald Trump for signature just a day after he inked a high-profile trade deal with China.
Outside of trade relations, market participants are digesting a fresh round of corporate earnings reports, with shares of Morgan Stanley MS, +8.10% rallying 6.9% early Thursday, after the investment bank reported fourth-quarter earnings and sales that rose well above expectations, adding to what has been a mostly positive reporting season for the financial services industry.
““It is hard to find anything to criticize in Morgan Stanley’s most recent earnings,” Octavio Marenzi, CEO of capital markets consultancy Opimas wrote in an email. “This was a strong quarter across all of Morgan Stanley’s lines of business.”
Investors were also looking ahead to results from CSX Corp. CSX, +1.97%, after the close.
Which data are in focus?
In a good sign for the U.S. economy, most retailers posted higher sales in December to finish out the holiday season on a strong note. Retail sales increased 0.3% last month, the government said Thursday, just a tick below the MarketWatch forecast.
The number of Americans who applied for unemployment benefits in early January fell for the fifth week in a row, giving a clean bill of health to strong U.S. labor market as 2020 got underway.
The Philadelphia Fed said Thursday its gauge of business activity in its region surged in January. The regional Fed bank’s index rose to 17 in January from 2.4 in the prior month.
Home builder confidence fell one point to 75 in January from the month prior, though it remains near its highest reading since 1999, according to the National Association of Home Builders confidence index.
“Markets simply cannot keep getting economic data like this showing the labor market is the strongest in history and with consumers spending their hearts out and still believe that the economy could be anywhere near the edge of the recession cliff,” MUFG chief economist Chris Rupkey wrote in a note.
Which stocks are in focus?
Southwest Airlines Co. LUV, +0.42% said that it removed the Boeing Co.’s BA, +0.51% 737 Max flights from its schedule through June 6. Shares of Southwest were up 0.4% Thursday, while Boeing shares gained 0.4% also
Shares of Signet Jewelers Ltd. SIG, +42.25% soared by 40% after the company provided upbeat sales guidance and reported better-than-expected holiday sales.
Shares of Bank of New York Mellon Corp. BK, -7.76% fell 7% Thursday, though the company reported earnings and revenue that rose above analyst expectations.
How are other markets trading?
In bond markets, the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +1.47% rose 2.4 basis points to 1.812%.
Oil prices rose with the price of a barrel of West Texas Intermediate Crude for February delivery CLG20, +1.54% adding 90 cents, or 1.6%, to $58.87. In precious metals, the price of gold ticked lower, with an ounce of gold for February delivery GCG20, -0.14% falling $2.80, or 0.2% , to $1,551.20.
The U.S. dollar DXY, +0.09% declined 0.1%, relative to a basket of its peers.
In Europe, stocks edged higher, with the Stoxx Europe 600 SXXP, +0.22% closing 0.16% at 420.32, a new record close.
In Asia overnight, stocks traded mixed. The China CSI 300 000300, -0.42% fell 0.5%, Hong Kong’s Hang Seng index HSI, +0.38% gained 0.4% and Japan’s Nikkei NIK, +0.07% rose 0.1%.