Stocks pushed higher as an extension of a key deadline for the U.S. and China to come to a trade agreement spurred investors’ risk appetites.
The S&P 500 (^GSPC) rose 0.12%, or 3.44 points, as of market close. The Dow (^DJI) rose 0.23%, or 60.14 points, while the Nasdaq (^IXIC) rose 0.36%, or 26.92 points.
The three major indices pared gains at the close after earlier setting new 2019 intraday highs. The S&P 500 rallied as high as to 2,813.49 points, while the Dow touched 26,241.42. Both were the highest levels for the indices since November 8. The Nasdaq’s intraday high of 7,602.69 was the highest since October 18.
“Risk is starting the week in ‘on’ mode,” Kit Juckes, Societe Generale strategist, wrote in a note Monday.
President Donald Trump on Sunday wrote in a Twitter post that he was pushing back the scheduled increase in tariffs on Chinese goods set to take place after March 1, noting that the U.S. has made “substantial progress” in trade talks with China. The Chinese state-run Xinhua News Agency reaffirmed these remarks in its own official statement published Monday.
“Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement,” Trump wrote. “A very good weekend for U.S. and China!”
Some of the issues being addressed include intellectual property protection, technology transfer, agriculture, services and currency, Trump said. U.S. Agriculture Secretary Sonny Perdue wrote in a Twitter post Friday that the Chinese had committed to purchasing an additional 10 million metric tons of U.S. soybeans, an agricultural commodity which has been at the center of the trade war as China, the world’s largest soybean importer, pared back its purchases from the U.S. amid trade tensions. In January, China purchased 135,814 tonnes of U.S. soybeans, or nearly double the amount from December but more than 97% lower from the 5.82 million tonnes purchased in the year-ago period.
Progress toward a trade deal after more than a year of tensions between the U.S. and China has been a key driver of investor sentiment over the past several months. But these recent developments also come amid a host of other positive catalysts for equities, including Federal Reserve monetary policy aligned with a “patient” posturing and recuperating oil prices following a precipitous drop at the end of 2018.
“We believe stocks could run further though it’s only a matter of time until another catalyst appears on the landscape to challenge investors’ sentiment,” John Stoltzfus, managing director of Oppenheimer, wrote in a note Monday. “That said we remain highly constructive on equities stateside and internationally. So long as an agreement can be reached on trade between the U.S. and China we expect an upward re-rating of the global economy as the process of globalization is reengaged and reaffirmed if in a somewhat altered but improved state in terms of fairness.”
Elsewhere, crude oil prices slipped after Trump wrote in a Twitter post Monday morning, “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” West Texas Intermediate crude oil futures (CL=F) dropped 3.1% to $55.48 per barrel as of Monday’s settlement, marking the largest drop since January 28 and snapping an 8-day winning streak. The commodity had hit a year-to-date high of $57.81 per barrel on Friday amid U.S. sanctions on OPEC nations Iran and Venezuela and a broader appetite for risk assets given trade progress.
The 10-year U.S. Treasury yield rose 1.7 basis points to 2.672% as of 3:55 p.m. ET ahead of a testimony from Federal Reserve Chairman Jerome Powell before Congress Tuesday and Wednesday.
STOCKS
General Electric (GE) said in a statement Monday that it is selling its biopharmaceutical business to conglomerate Danaher Corporation. The $21.4 billion deal, expected to close in the fourth quarter of 2019, will include a $21 billion cash payment by Danaher, as well as an assumption of certain GE pension liabilities, and comes as GE is in the midst of efforts to shrink its more than $100 billion in debt. GE’s biopharmaceutical unit is expected to generate more than $3 billion in revenue this year. Bloomberg reported that GE is reconsidering plans for an initial public offering of its health-care unit as a result of the biopharmaceutical business unit, after the company reportedly confidentially filed for the unit’s IPO in December. Shares of GE rose 6.39% to $10.82 each as of market close.
Barrick Gold Corporation (GOLD) announced on Monday it has made an all-stock offer to merge with Newmont Mining Corporation (NEM). Under terms of the proposition, each Newmont shareholder would receive 2.5684 Barricks shares per Newmont share, with Barrick shareholders then owning about 56% of the merged company and Newmont shareholders owning the remaining 44%. Barrick CEO Mark Bristow said in a statement that the merger is “expected to unlock more than $7 billion net present value (pre-tax) of real synergies, a major portion of which is generated by combining the two companies’ highly complementary assets in Nevada, including Barrick’s significant mineral endowments and Newmont’s processing plants and infrastructure.” Shares of Barrick Gold fell 3.37% to $12.60 each as of market close, while shares of Newmont Mining slipped 1.04% to $36.10 each.
Kraft Heinz (KHC) shares extended losses after Warren Buffett told CNBC Monday that Berkshire Hathaway (BRK-A, BRK-B) paid too much for a stake in the consumer packaged goods company. The comments come as Buffett said in his annual letter to shareholders Saturday that Berkshire Hathaway took a $3 billion write-down of its investment in Kraft, following Kraft’s own write-down of its Oscar Mayer and Kraft brands by $15.4 billion and disclosure that the Securities and Exchange Commission was investigating the company. However, Buffett said he does not have any intentions of selling his stake in Kraft Heinz, and that it would in fact be difficult to do so since the company’s position is so large. Berkshire Hathaway owns about 27% of Kraft Heinz common shares. Shares of Kraft fell 2.06% to $34.23 each as of market close.
ECONOMY
The Chicago Federal Reserve National Activity Index registered a surprise decline in January as production-related indicators fell. The headline index decreased to -0.43 in January from positive 0.05 in December, while consensus estimates had been for a reading of positive 0.10 for the month. The negative reading points to below-trend growth in the U.S. economy. Of the 85 indicators comprising the index, 38 improved, 46 declined and one remained the same. Production-related indicators fell to -0.45 in January from positive 0.08 in December, consistent with weakening manufacturing conditions reflected in other regional Federal Reserve indices.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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