US economy

Optimism over U.S.-China trade drives the stock market to record highs


The Dow Jones industrial average closed at a record high on Monday, its first since the summer, joining two other major stock indexes at new peaks as investor were, buoyed by renewed optimism about a U.S.-China trade deal.

Stocks have done an about-face this autumn after fears about a pending recession rattled stocks in August. Recent optimism over a trade deal between the world’s two biggest economies, along with better-than-expected corporate earnings and a strong labor market, has eased fears about a slowdown in domestic growth.

U.S. Commerce Secretary Wilbur Ross expressed optimism over the weekend that Washington and Beijing would reach a phase-one deal, adding that licenses would be coming shortly for American companies to sell components to Chinese telecom giant Huawei Technologies.

On Monday, the blue-chip average climbed 114.75 points, or 0.42%, to end at 27,462.11, its first all-time high since July. The broader Standard & Poor’s 500 and the tech-heavy Nasdaq Composite, which just hit records Friday, again touched new closing highs, with the S&P finishing up 11.36 points, or 0.4%, at 3078.27 and the Nasdaq ending the day with a gain of 46.80 points, or 0.6%, putting it at 8433.20. 

The march to new highs also comes as the Federal Reserve has cut interest rates three times since July to cushion the economy against a slowdown. The central bank signaled last week that it would not lower rates again unless the economy slowed further.

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Energized

Energy shares led the charge Monday, helped by a rise in oil prices. Dow components Chevron and Exxon jumped 4.6% and 3%, respectively. Meanwhile, Walgreens Boots Alliance climbed 4%. 

U.S. oil prices climbed 34 cents to $56.54 a barrelon upbeat trade negotiations. Gold, considered a safe-haven asset, was little changed while the dollar rose.

Banks also rose broadly, with Bank of America and Citigroup both up nearly 2%. Bond prices fell as the yield on the 10-year Treasury note rose to 1.78% from 1.72% Friday. Yields move in the opposite direction of prices. Higher yields allow banks to charge more lucrative interest rates on loans.

Under Pressure

McDonald’s was among the biggest decliners in the Dow, shedding 2.7% after the fast-food chain fired CEO Steve Easterbrook for having a “consensual” relationship with an unnamed employee. Piper Jaffray downgraded the stock on Monday to neutral from overweight on concerns that Easterbrook’s departure could pressure shares.

Meanwhile, Under Armour slumped 18.9% after the sportswear giant said Sunday that its accounting practices have been under federal investigation for two years.



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