Stocks stum­ble to records as re­ports dif­fer

The News Herald (Willoughby, OH) - - FRONT PAGE - By Stan Choe

Stocks jumped early af­ter China said both sides agreed to roll back tar­iffs if talks progress. There’s more.

NEW YORK >> In the stock mar­ket, it’s all about trade now.

Stocks were jump­ing early Thurs­day af­ter China said both sides in the U.S.-China trade war had agreed to roll back tar­iffs if their talks progress. But much of the en­thu­si­asm evap­o­rated in the af­ter­noon amid con­cerns that some in the White House op­pose eas­ing up on tar­iffs.

By the end of trad­ing, the S&P 500 was up 8.40 points, or 0.3%, at 3,085.18. It man­aged to set a record for the sec­ond time this week, but it had been on pace for a big­ger, 0.7% gain ear­lier in the day.

The Dow Jones In­dus­trial Av­er­age climbed 182.24, or 0.7%, to 27,674.80 and also set a record. The Nas­daq com­pos­ite fin­ished just shy of its all-time high af­ter ris­ing 23.89, or 0.3%, to 8,434.52.

En­cour­ag­ing re­ports on the econ­omy and cor­po­rate prof­its have helped drive stocks back to record heights in re­cent weeks. The U.S. job mar­ket re­mains strong, and the Fed­eral Re­serve has cut in­ter­est rates three times since the sum­mer to bol­ster the econ­omy. Earn­ings for big com­pa­nies, mean­while, weren’t as bad in the sum­mer as Wall Street had feared.

That leaves the U.S. trade war as the wild card for the global econ­omy, and mar­kets are trad­ing on ev­ery whiff of move­ment about it as a re­sult.

“It’s not that trade is more im­por­tant to the mar­ket than eco­nomic growth or than the Fed,” said Steve Chi­avarone, eq­uity strate­gist at Fed­er­ated In­vestors. “It’s that the mar­ket has al­ready priced in that pic­ture” of a still solid econ­omy and eas­ier in­ter­est rates.

“What’s left to be de­ter­mined is trade, and there’s a greater amount of un­cer­tainty be­cause we’ve had head fakes be­fore.” Pres­i­dent Don­ald Trump’s trade war has been a top con­cern for in­vestors since early 2018. In­creased tar­iffs not only raise costs and sap prof­its for U.S. com­pa­nies.

They also can and have made CEOs hes­i­tant to spend on new factories, ex­pan­sions and other in­vest­ments given all the un­cer­tain­ties about what the rules of trade will be. Mo­men­tum has been mov­ing to­ward a deal, at least an in­cre­men­tal one that pre­vents con­di­tions from get­ting worse. Trump said last month they had reached “Phase One” of an agree­ment. The two sides are work­ing on the de­tails, though a per­son who was briefed on the talks Thurs­day in­di­cated there were still de­lib­er­a­tions in the White House about how far to roll back the tar­iffs.

Al­to­gether, the im­prove­ments mean the wor­ries about a pos­si­ble re­ces­sion that dom­i­nated mar­kets just a few months ago are di­min­ish­ing. That in turn has more on Wall Street con­fi­dent that this bull mar­ket for stocks, which al­ready is the long­est on record, can keep go­ing.

More than a dozen com­pa­nies joined the lengthy pa­rade of those re­port­ing stronger prof­its for the lat­est quar­ter than analysts ex­pected.

Qual­comm jumped 6.3% af­ter it re­ported both rev­enue and earn­ings that topped Wall Street’s fore­casts, and Ralph Lau­ren surged 14.7% for the big­gest gain in the S&P 500 fol­low­ing its own bet­ter-than-ex­pected re­sults.

Com­pa­nies are no longer get­ting the ben­e­fit of the first year of lower tax rates, and they’re also con­tend­ing with a slow­ing global econ­omy weigh­ing on their sales. But the S&P 500 is on track to re­port a drop of 2.5% in third-quar­ter earn­ings per share from a year ear­lier, ver­sus the 4% that analysts ini­tially ex­pected, ac­cord­ing to Fac­tSet.

In a sign of in­creased op­ti­mism about the econ­omy, the yield on the 10-year Trea­sury climbed to 1.92% from 1.81% late Wed­nes­day. It has risen sharply over the last five weeks and is close to its high­est level since the start of Au­gust.

The jump in yields helped send bank stocks, whose prof­its ben­e­fit from higher rates for mort­gages and other loans, to some of the mar­ket’s big­gest gains.

Other mar­ket lead­ers in­cluded oil com­pa­nies and stocks that Wall Street calls “cycli­cals” be­cause their prof­its are closely tied to where the econ­omy is in its growth-and-re­ces­sion cy­cle.

En­ergy stocks jumped 1.6% for the largest gain among the 11 sec­tors that make up the S&P 500, and fi­nan­cial stocks climbed 0.7%.

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