Global Stock Rally Builds As US-China Trade Talks Wrap Up

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NEW YORK — Stocks around the world built on their early 2019 rally Wednesday after negotiators from the U.S. and China extended their trade talks to a third day, which investors took as a sign the discussions were productive even though no major breakthroughs have been announced. Oil prices also continued to climb and stocks linked to faster economic growth, such as technology companies, kept rising.

KEEPING SCORE: The S&P 500 index climbed 16 points, or 0.6 percent, to 2,590 as of 1:45 p.m. Eastern time. It’s on track for its fourth consecutive gain. The Dow Jones Industrial Average picked up 159 points, or 0.7 percent, to 23,946. The Nasdaq composite rose 77 points, or 1.1 percent, to 6,974. The Russell 2000 index of smaller and U.S.-focused stocks added 10 points, or 0.7 percent, to 1,436.

Indexes in Europe also rose. Germany’s DAX and the French CAC 40 each added 0.8 percent and Britain’s FTSE 100 gained 0.7 percent. Asian stocks made bigger gains. Japan’s Nikkei 225 gained 1.1 percent and the Hang Seng in Hong Kong rallied 2.3 percent. South Korea’s Kospi advanced 1.9 percent.

CHINA-US TRADE: The latest round of trade negotiations between the world’s two largest economic powers have now concluded, but investors were cheered when they learned the two-day talks would be extended by a day. No details were immediately announced.

The Trump administration wants the government of President Xi Jinping to alter its handling of technology and intellectual property held by foreign companies, and change plans for government-led creation of Chinese leaders in advanced technologies. Chinese officials have suggested they could revise some of their industrial plans but have but won’t abandon larger goals that they consider a path to prosperity and global influence.

TECH ON TOP: Chipmakers made some of the largest gains. Chipmakers took big losses in the second half of 2018 as investors worried about an abrupt slowdown in the global economy as well as the possibility that demand for chips was falling and supplies were too large. The Philadelphia Semiconductor index dropped 25 percent from early June to late December.

On Wednesday Micron Technology surged 7.1 percent to $36.11 and Applied Materials gained 5.1 percent to $34.59 while Broadcom climbed 4 percent to $245.54. Elsewhere, Microsoft gained 1.8 percent to $104.66 and Apple picked up 2.2 percent to $154.07.

GONNA NEED THAT DRINK: Beer and wine maker Constellation Brands slumped after it cut its annual profit forecast, saying it now expects sales and profits for its wine and spirits division to fall in the current fiscal year. The stock gave up 10.9 percent to $153.68.

The Corona maker also said it wrote down the value of its $4 billion investment in Canadian marijuana producer Canopy Growth by $164 million. Pot stocks made big gains in 2018 as Canada legalized recreational marijuana, and drugmakers and consumer-focused companies like Constellation, Molson Coors and Altria struck partnerships with growers to develop products together.

However the sector has been extremely volatile. Canopy climbed 13 percent to $33.53 on Wednesday, but has lost almost half its value since mid-October, when it traded as high as $56 a share. While Cronos Group and Tilray made smaller gains.

ENERGY: Oil prices also continued to rally. U.S. crude rose 5 percent to $52.26 a barrel in New York. It hadn’t traded above $50 a barrel in almost a month. Brent crude, used to price international oils, added 4.1 percent to $61.14 a barrel in London.

Crude oil is on track to rise for the eight day in a row and ninth in the last 10. U.S. crude has jumped 14 percent so far in 2019.

HOMEBUILDER BOUNCE: Lennar jumped 7.3 percent to $46.01 and other homebuilders also made strong gains after Lennar gave its fourth-quarter report. CEO Stuart Miller said the company isn’t ready to give forecasts about its performance in 2019 because of “continued softness and uncertainty,” but said Lennar has seen signs the housing market is improving as mortgage rates dipped over the past couple of months.

Even that mixed news helped the sector. D.R. Horton leaped 5.3 percent to $39.22 and PulteGroup added 1.3 percent to $28.72. Many homebuilder stocks dropped 20 to 30 percent or more in 2018 as high prices and increasing mortgage rates hurt sales.

BONDS: Bond prices continued to fall. That sent yields higher, a sign investors expect more economic growth and higher long-term interest rates. The yield on the 10-year Treasury note rose to 2.72 percent from 2.71 percent.

Bond yields have climbed in the last few days, and that’s hurt stocks of slower growth, high-dividend companies including real estate investment trusts and utility operators. Those stocks are often compared to bonds because they make large, regular payments to shareholders, similar to the yields on bonds. The stocks often do well when investors are concerned about economic growth, but they often lag when growth looks solid and bond yields rise.

Pepsi fell 2.4 percent to $107.93 and Duke Energy lost 1.6 percent to $84.72. Digital Realty Trust sank 5.5 percent to $101.44 after a disappointing forecast.

FED MINUTES: The Federal Reserve will release minutes from its policy meeting last month, at which the central bank raised interest rates and reduced its forecasts for the number of hikes this year from three to two.

CURRENCIES: The dollar slipped to 108.27 yen from 108.65 yen. The euro climbed to $1.1534 from $1.1443 and the British pound rose to $1.2783 from $1.2719.

By MARLEY JAY - Jan 9. 2019 - 1:53 PM EDT
AP


AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP

 
 

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