U.S. stocks advanced to close at new all-time highs Tuesday, as investors focused on U.S.-China trade talks and an upbeat assessment of the economy from Federal Reserve Chairman Jerome Powell.
How did major indexes fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.36% rose 55.21 points, or 0.2% to 28,121.68, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.45% rose 6.88 points, or 0.2% to 3,140.52 The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.52% gained 15.44 points, or 0.2%, to close at 8,647.93. Volumes were expected to remain subdued ahead of Thursday’s Thanksgiving Day holiday, which will see U.S. markets closed, followed by an abbreviated trading session on Friday.
Tuesday’s action marked the 10th record close of the month for all three major indexes.
What drove the market?
Stocks have been sensitive to developments in the long-running U.S.-China trade battle and have been largely in rally mode since October, after Washington and Beijing signaled they were working toward a partial deal aimed at resolving less controversial issues. Still ahead is an important Dec. 15 deadline, when a new round of U.S. tariffs on Chinese imports are due to take effect.
Top Chinese and U.S. negotiators agreed on talks toward a preliminary “phase one” deal, China’s Commerce Ministry said Tuesday. The ministry said Vice Premier Liu He, the country’s top negotiator, spoke by phone with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, a conversation the official Xinhua News Agency described as focused on “solving issues regarding each other’s core concerns…”
During an Oval Office event Tuesday, U.S. President Donald Trump said that Washington was in the “final throes” in its efforts to reach a trade deal with China, but also underscored that Americans stand with pro-democracy protesters in Hong Kong.
“With global central banks pumping liquidity into the system and investors sensing that a trade deal is coming, that could create more upside,” Yousef Abbasi, director of U.S. institutional equities at INTL FCStone, told MarketWatch. “The market is telling us that the status quo is fine — we can live with no deal in 2019 as long as we don’t see any new tariffs and the rhetoric stays on the friendly side.”
Abbasi also said that equity markets’ upward trajectory could be sustained by calendar effects, during a holiday week and heading into the final month of the year. “As you start to get to the period of light volumes and lighter news flow, what tends to happen is that as long as systematically markets are working, they’ll keep up the trend they’ve been on.”
Meanwhile, Fed Chair Powell, in remarks Monday evening, outlined an optimistic view of the U.S. economy but signaled that low inflation would likely keep interest rates low. The Fed chief said that the central bank’s three rate cuts this year have helped to spur home purchases, contributing to the economy’s longest expansion on record. On Tuesday Federal Reserve Board Gov. Lael Brainard called for a major overhaul in how the Fed sets U.S. interest rates , while speaking Tuesday at the New York Association for Business Economics.
In U.S. economic data, the trade deficit fell 6% to $66.5 billion, versus expectations of $70.3 billion, according to a MarketWatch poll of economists, but the U.S. is still likely to post the biggest trade deficit in 2019 in 11 years.