New highs as U.S., China near a deal

Los Angeles Times - - BUSINESS BEAT -

Tech­nol­ogy com­pa­nies led stocks on Wall Street to broad gains Mon­day, driv­ing the Stan­dard & Poor’s 500 and Nas­daq com­pos­ite in­dexes to more record highs.

Fi­nan­cial, com­mu­ni­ca­tions ser­vices and in­dus­trial stocks also notched solid gains. Health­care stocks were the only de­clin­ers. Bond prices fell, send­ing yields higher, and the price of gold fell — signs that in­vestors were fa­vor­ing higher-risk hold­ings.

The rally, which added to the mar­ket’s gains from last week, came as in­vestors looked ahead to the sign­ing of an ini­tial trade deal with China and the po­ten­tial for fu­ture talks.

The world’s largest economies are ex­pected to sign the “Phase 1” trade agree­ment Wed­nes­day. It is be­ing viewed as an open­ing to fu­ture ne­go­ti­a­tions that will deal with more com­pli­cated trade is­sues.

Even a par­tial deal should re­move much of the un­cer­tainty that has weighed on com­pa­nies and in­vestors, at least un­til af­ter the U.S. pres­i­den­tial elec­tion, said Scott Lad­ner, chief in­vest­ment of­fi­cer for Hori­zon In­vest­ments in Char­lotte, N.C.

“We don’t think the tar­iff over­hang is go­ing to be very rel­e­vant over the next nine months,” Lad­ner said. “Act­ing tough with China and im­pos­ing tar­iffs two years be­fore an elec­tion is a very dif­fer­ent story than do­ing it … months be­fore an elec­tion.”

The S&P 500 in­dex rose 22.78 points, or 0.7%, to 3,288.13. The Nas­daq com­pos­ite climbed 95.07 points, or 1%, to 9,273.93. The S&P and Nas­daq pre­vi­ously set new highs on Thurs­day.

The Dow Jones in­dus­trial av­er­age ticked up 83.28 points, or 0.3%, to 28,907.05. The Rus­sell 2000 in­dex of smaller-com­pany stocks rose 11.96 points, or 0.7%, to 1,669.61.

Elec­tric car maker Tesla leaped 9.8%, clos­ing above $500 for the first time.

Chip­mak­ers were among the gain­ers in the tech­nol­ogy sec­tor. Nivida climbed 3.1%, and Mi­cron Tech­nol­ogy rose 1.4%. The sec­tor is par­tic­u­larly sen­si­tive to de­vel­op­ments in trade re­la­tions be­cause many of the com­pa­nies rely on China for sales and sup­ply chains. Ap­ple rose 2.1%. In­dus­trial and com­mu­ni­ca­tion ser­vices com­pa­nies also made solid gains. Gen­eral Elec­tric rose 3.9%. Face­book added 1.8%.

Health­care stocks slumped, with in­sur­ance com­pa­nies among the sec­tor’s big­gest de­clin­ers. Cigna fell 3.2%, Unit­ed­Health Group slid 3.1%, and An­them dropped 3.6%.

The yield on the 10-year Trea­sury rose to 1.85% from 1.82%. The pickup in yields helped lift fi­nan­cial stocks, as higher yields make it pos­si­ble for banks to charge higher in­ter­est rates on mort­gages and other con­sumer loans. Gold­man Sachs shares rose 1.3%. Cit­i­group shares gained 1.8%.

Net­flix climbed 3% as the stream­ing video ser­vice earned two best pic­ture nom­i­na­tions for the 92nd an­nual Academy Awards.

Hex­cel jumped 9.6% af­ter the com­pany said it is be­ing bought by ri­val Wood­ward in a deal that will cre­ate one of the largest sup­pli­ers in the aero­space and de­fense in­dus­try. Wood­ward rose 4.8% and would own the ma­jor­ity of the com­bined com­pany when the deal closes.

Wall Street was also gear­ing up Mon­day for a busy open­ing week of cor­po­rate earn­ings be­ing kicked off by ma­jor banks.

Gold fell $9.10 to $1,548.40 an ounce.

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