By Clive McKeef
The Dow Jones Industrial Average and benchmark S&P500 index both closed at new records Wednesday, helped by a jump in Disney’s stock price, as a five week rally rolled on.
Factors supporting the rally include the prospect of a U.S. - China trade deal, the move by the Federal Reserve to cut interest rates three times this year and resume buying short dated debt to add liquidity to money markets, and a surge in government spending as the federal budget deficit rises toward $1 trillion.
How are major indexes trading?
The Dow Jones Industrial Average rose 92.10 points, or 0.33%, at 27,783.59. The S&P 500 edged up 2.20 points or 0.07%, to 3,094.04, but the Nasdaq slipped 3.99 points or 0.05%, to 8,482.10.
For the year to date the Dow is up 19.10% while the S&P500 is up 23.42%.
On Tuesday the Dow /zigman2/quotes/210598065/realtime DJIA +0.01% ended unchanged at 27,691.49. The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.0073% rose 4.83 points, or 0.2%, to end at 3,091.84, while the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.20% rose 21.81 points to end at 8,486.09, up 0.3%.
What’s driving the market?
The prospect of a U.S. - China trade deal remains the main factor sustaining a rally that has pushed U.S. stocks record highs in the past five weeks.
But trade talks may have hit a snag over farm purchases, the Wall Street Journal reported Wednesday afternoon. President Trump earlier said China had agreed to buy up to $50 billion in U.S. soybeans, pork and other agricultural products annually, but China is reluctant to put a numerical commitment in the text of a potential agreement, sources said.
The dispute over farm purchases is one of several issues that have delayed completion of the limited trade accord announced by Trump and Chinese Vice Premier Liu He on Oct. 11. Both sides are also at odds over when and by how much the U.S. would agree to lift tariffs on Chinese imports.
Chinese officials have also resisted U.S. demands for a strong enforcement mechanism for the deal and curbs on the forced transfer of technology for companies seeking to do business in China.
In a Tuesday speech at the Economic Club of New York, Trump said a “significant phase one” deal could happen soon, but only if the deal worked to the advantage of U.S. workers and businesses.
“Overall, the calm in the trade war and the broader risk-on sentiment of recent weeks may be more fragile than they appear, and with markets having gone on a euphoria rally lately, it might not take much bad news to trigger a notable correction,” Marios Hadjikyriacos, investment analyst at XM, in wrote.
Meanwhile, Federal Reserve chairman Jerome Powell testified before the Joint Economic Committee of Congress Wednesday, the first of two congressional appearances this week. Interest rates are on hold unless there is a material deterioration in the economy, Powell said in published remarks.