By Clive McKeef
Stocks closed higher Tuesday on news of progress on U.S. - China trade talks, an announcement of a While House and Congressional deal on the federal budget and debt ceiling and good corporate earnings.
Better-than-expected earnings from Dow Jones Industrial Average components, Coca-Cola and United Technologies reported before the market opened also helped stocks rise for a second day.
How are the major benchmarks faring?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.40% closed up 177 points at 27,349, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.47% advanced 20 points to 3,005 and the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.87% ended up 47 points at 8,251.
The Dow saw its second highest close ever after two days of gains and ended at the highest since July 15. The S&P 500 ended at its third highest ever and is now just 0.29% from its record close of 3014.30 hit Monday, July 15, 2019.
But including Tuesday, the DJIA has not had a 1% move in either direction for 24 consecutive trading days, the longest such streak since August-October 2018 when it went 30 days without a 1% move. Similarly, the S&P 500 has not had a 1% move in either direction for 31 trading days, the longest such streak since June-October 2018 when it went 74 days without a 1% move.
What’s driving the market?
Talks between China and the U.S. would start Monday as U.S. negotiators headed to China, Bloomberg reported . The U.S. delegation will be led by Trade Representative Robert Lighthizer and will be in China through Wednesday. Earlier the Hong Kong based South China Morning Post also reported that U.S. trade negotiators were likely to visit China next week.
The world’s two largest economies have been locked in a trade war that has seen 25% tariffs imposed by President Donald Trump on $200 billion of Chinese products. China has retaliated with their own tariffs prompting fears of a global economic slowdown.
Stocks got support earlier in the day from news congressional leaders announced a budget deal with the White House that will also raise the federal government’s debt ceiling. If approved by both the House and Senate, the deal likely would avoid a repeat of the government shutdowns that plagued Washington in early 2018 and again at the beginning of 2019.
“This morning’s announcement of the deal between Congress and the White House to suspend the debt ceiling for the next two years is undiluted good news,” Brad McMillan, Chief Investment Officer for Commonwealth Financial Network said. “With an agreement that the government can borrow to spend the money that it has already committed to spending, we can avoid a totally unnecessary, politically driven crisis that could have caused real economic damage.”
Better-than-expected earnings from Dow Jones Industrial Average components, Coca-Cola /zigman2/quotes/209159848/composite KO +0.40% and United Technologies /zigman2/quotes/203237915/composite UTX -0.40% reported before the market opened also helped stocks rise for a second day.
More than 18% of S&P 500 companies have posted quarterly numbers this earnings season. Of those companies more than 78% have reported better-than-expected profits, according to FactSet data. Those companies have also seen their earnings grow by an aggregate of 3.6%.
Visa /zigman2/quotes/204223983/delayed AT:VISA +1.29% , Chipotle /zigman2/quotes/200781108/composite CMG +0.68% , and Snap /zigman2/quotes/205087158/composite SNAP +0.17% are due to report earnings after the market close Tuesday.
Earnings reporting season rolls on this week with companies including Amazon.com /zigman2/quotes/207159039/delayed XE:AMZ +2.23% , Alphabet /zigman2/quotes/205453964/composite GOOG +0.46% , Caterpillar /zigman2/quotes/203434128/composite CAT +0.21% , McDonald’s /zigman2/quotes/203508018/composite MCD -0.24% and /zigman2/quotes/208579720/composite BA -0.17% still to report.