The limited pact of the US and China regarding their trades on Thursday have shown a positive impact as shares increased on Wednesday. This rise in the trade stocks is the first one after having low figures in the last three days.
With China reporting that they have low expectations about the trade talks with US, the stock gains have experienced a narrower increase. The Dow Jones Industrial Average was able to gain 0.7% or 180 points while the S&P increased by 0.9%. Additionally, the Nasdaq Composite also gained 1%.
Apple is also a significant contributor to the gains, having experienced a 1.3% rise. This was because of a Canaccord Genuity increased his iPhone maker price from $240 per share to $260. With more than 1% gains, Tech became “the best performing sector in the S&P 500”.
In a report released by the Bloomberg News, it is said that China prepared themselves to agree on a partial trade deal with the US under the condition that President Donald Trump will no longer announce more tariff increase. In return, Beijing has offered the purchase of agricultural products and other non-concessions. However, Beijing did not make any move about the major issues between them and the US.
In a separate report by the Financial Times, they reported that Chinese officials have been purchasing more agricultural products from the US so that they could reach a partial deal with the US.
Nicholas Colas, the co-founder of DataTrek Research, stated that imagining the S&P 500 having similar gains as now in October 2020 might be challenging with the lack of a good trade deal, better economic growth worldwide, and improved earnings in the corporate world. He also added that several markets are not easily swayed by there factors. He also pointed out that the high-yield corporate and investment-grade are still “fairly tight.”
Since 2018, the two economic giants have been imposing tariffs on each other’s products, amounting to billions of dollars. Because of this tariff war, financial markets have been battered, and many businesses have been affected, as well as several consumer groups. This dispute has been slowly expanding beyond the trade policy itself, inducing fear and further detriment to the fragile worldwide economy.
The market experienced a sharp decline last Tuesday because the expectations about the trade talk progress became slower. The Dow Jones Industrial Average lost around 300 points while both the Nasdaq Composite and the S&P 500 experienced a 1% drop each. The low expectations were due to the several Chinese companies that made it to the US blacklist for trades and the visa restrictions that US imposed on many Chinese officials.
An investment strategist at Baird, Willie Delwiche, explained that they observed weaknesses on the close last Tuesday that was bought on Wednesday instead. He also said that Tuesday’s stocks finished on an extended negative rate. Delwiche said that now would be the time to wait for the headlines to see if the Wednesday stock gains can build itself or if the weaknesses they observed will prevail instead.