By Chris Matthews, MarketWatch
U.S. stock indexes closed higher Wednesday afternoon, though the major benchmarks ended the day well off session highs, after President Donald Trump signed the first phase of a trade pact with China, marking a truce in the dispute over import tariffs which has unsettled markets world-wide and slowed economic growth.
How did the benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.39% rose 90.55 points, or 0.3%, at 29,030.22, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.82% gained 6.14 points, or 0.2% to 3,289.29, while the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.01% gained 7.37 points, or 0.1%, to close at 9,258.70.
All three major benchmarks set record intraday highs, while the Dow and S&P 500 ended the session at record closing levels.
At session highs on Wednesday, the Dow was up 187.92 points, or 0.6%, the S&P 500 had gained 15.51 points, or 0.5% and the Nasdaq Composite was up 47.49 points, or 0.5%.
What drove the market?
Trump and Chinese Vice Premier Liu He signed a long-awaited preliminary trade pact in the East Room of the White House White House Wednesday and investors were heartened by some of the details of the deal released by the Trump administration.
The text of the deal includes promises by the Chinese to increase their purchases of U.S. agricultural, manufacturing, and energy products, along with purchases of services, by more than $200 billion over the next two years, though it also states that “the parties acknowledge that purchases will be made at market prices based on commercial considerations.”
It also includes commitments by the Chinese to enforce intellectual property theft laws and a “bilateral evaluation and dispute resolution arrangement” that will encourage the U.S. and China to work jointly to resolves allegations of patent and copyright infringement or intellectual property theft.
During the singing ceremony, President Trump said it was “a great deal for both countries” and China’s Liu He called the pact a “landmark agreement.”
Investors and analysts said that the deal was more substantial than many critics of the trade negotiations had expected, with the magnitude of promised Chinese imports of U.S. goods larger than many had anticipated.
“I think what’s happening is that people are recognizing that, while there’s a lot of room to go with additional discussions with China, what is happening today is a real positive step,” Wayne Wicker, CIO of Vantagepoint Investment Advisers told MarketWatch.
Stocks did end the day, however, off their peaks, and Randy Frederick, vice president of trading and derivatives with the Schwab Center for Financial Research, called this action “classic ‘buy the rumor, sell the news,’ activity,” referring to the tendency for stock investors to bid up stock prices in the anticipation of good news and take profits when it comes to fruition.
“This market has been in a robust up trend, really since Oct. 11, the day Trump first announced a deal with China,” he added. “In this environment, with markets at record highs, it’s not surprising we’d see some caution.”