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Stock Market News for Jan 2, 2020

Zacks Equity Research

Benchmarks closed in the green on Tuesday as President Trump confirmed that U.S.-China trade deal will be signed on Jan 15. The stock market was closed on Wednesday for New Year’s Day.

The Dow Jones Industrial Average (DJI) rose 76.3 points or 0.3%, to close at 28,538.44 and the S&P 500 gained 9.49 points or 0.3% to close at of 3,230.78. While, the Nasdaq Composite Index closed at 8,972.60, gaining 26.61 points or 0.3%. The fear-gauge CBOE Volatility Index (VIX) decreased 7% to close at 13.78. Advancing issues outnumbered declining ones, a 1.81-to-1 ratio on the NYSE and a 1.64-to-1 ratio on the Nasdaq favored advancers.

How Did the Benchmarks Perform?

Apart from the year-end rally the stocks were fuelled by the positive development on the trade front. However, trade volumes were slightly lower than the usual, as 5.99 billion shares traded on U.S. exchanges, compared with the 6.84 billion average for the full session over the last 20 trading days.

Out of the 11 major sectors of the S&P 500, the Materials Select Sector and Energy Select Sector were the best-performing rising around 0.7% and 0.6%, respectively. On the other hand, rise in shares of International Business Machines Corporation IBM, Cisco Systems, Inc. CSCO and Apple Inc. AAPL led the Dow to rally higher. Apple carries a Zack Rank 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Overall, the S&P 500 posted four new 52-week highs with no new lows and the Nasdaq Composite recorded 89 new highs and 26 new lows.

U.S.- China Phase 1 Deal to be Signed Mid-January

In the last trading day of the year, investors finally got a sign of relief on the U.S.-China trade front. President Trump tweeted that the Phase 1 U.S.-China trade deal would be signed on Jan 15 at the White House, where high level representatives from China will be present.

In the tweet, Trump also mentioned that the he will be going to Beijing soon “where talks will begin on Phase Two!” The signing of this phase one deal will definitely lead to a rally among stocks, especially those with high exposure to China. 

Economic Data

On Tuesday, October’s Case-Shiller Home Price – Composite 20 increased 0.1% in October, and by 2.2% compared to a year ago. Home prices at national level rose 3.3% on an annual basis, compared to previous month. 

On the other hand, the Conference Board’s index of consumer confidence dipped slightly in December to 126.5 and November’s revised reading came in at 126.8. The report suggests that strong labor market has made the Americans feel secure and confident enough to keep spending.

Monthly Roundup

Benchmarks skyrocketed throughout December, with major indexes closing at fresh all-time highs. Last month, the Dow rose 1.7%, the S&P 500 2.9% and the Nasdaq 3.6%. The major push came in from a strong holiday season retail sales detail where online sale rose 18.8% from last year and made up nearly 15% of the total retail sales. Additionally, the year-end Santa rally boosted the stocks higher with Nasdaq crossing the 9,000 points mark on Dec 26.

Quarterly Roundup

In the fourth quarter of 2019, the Dow gained 6%, the S&P 500 rose 8.5% and the Nasdaq rose 12.2%. The last three months of the year had been quite promising for Wall Street as the U.S.-China trade war finally seemed to ease and strong economic data boosted investors’ sentiments. At the beginning of the quarter, deputy level delegated from the United States and China started negotiating on trade issues and agreed to sign a “Phase one” trade deal. The United States halted the scheduled tariff hikes and China promised to buy more agricultural products.

Yearly Roundup

The stock market soared high in 2019 despite the prolonged U.S.-China trade war and slump in manufacturing sector. The dovish Federal Reserve and healthy American consumers helped the major benchmarks to attain fresh all-time highs especially in the second half of last year.  The Dow, the S&P 500 and the Nasdaq rose 22.3%, 28.9% and 35.2%, respectively in 2019.

The S&P 500 breached the 3,000-point mark in July and Nasdaq hit the 9,000-point mark in December. The S&P 500 also posted its biggest December percentage gain since 2010. The Dow gained 173.7%, while the S&P 500 and the Nasdaq rose 189.7% and 295.4%, respectively in the last 10 years. Moreover, the S&P 500 and the Nasdaq notched their biggest annual percentage gains since 2013, while the Dow closed 2019 with its biggest yearly percentage gain since 2017.

The interest rate cuts for three consecutive months, July to October by the Federal Reserve has helped stimulate the economy, as businesses could make the most of the low cost of borrowing. Additionally, American consumers had also played a crucial role in keeping the GDP growing at a pace of 2.1% (third-quarter report). Supported by a 50-year low un-employment rate and a substantial wage hike that kept consumers’ sentiments high.

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