Stocks Rise on Hopes for a U.S.-China Trade Deal
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What is the main topic discussed in this episode?
With your money briefing, I'm Charlie Turner in New York for The Wall Street Journal. U.S.
How did U.S. markets perform on Friday and last week?
financial markets have been on quite a run for 2019, so much so that the Nasdaq Composite Index has now exited the bear market it tumbled into the day before Christmas. Let's run down the numbers for Friday and the past week. Stock soared on Friday with the Dow Jones Industrials rising 443 points to 25,883. The Nasdaq rose 45 points and the S&P 500 gained 29. The Dow gained more than 3% the past week. Both the Nasdaq and S&P rose 2.5%, and markets are closed on Monday for President's Day. With us now to discuss the markets is Wall Street Journal Markets reporter Corey Drebisch. Corey, as mentioned, the Nasdaq has escaped the bear market, now up more than 20% from the Christmas Eve low. Why don't you tell us why this has happened?
Why has the Nasdaq exited its 2018 bear market and rallied in 2019?
Sure, Charlie. So as we all remember, the end of 2018 was a bit brutal, especially for technology stocks. We saw shares of Amazon, Apple, Netflix all really tank. And that had a lot to do with this fear of U.S. economic growth possibly slowing, as well as that overhang of trade tensions between the U.S. and China. And You know, in 2019, technology companies have really been on a tear. They're outperforming many other sectors. If you look at technology stocks in S&P 500, I think they're the third or fourth best performing sector this year. And a lot of that has to do with a couple of things. The whole market has benefited from the Federal Reserve signaling that they're not going to be raising interest rates much this year.
But also, trade tensions have eased.
What factors have driven technology stocks' strong performance this year?
There's been some progress there. And the U.S. economy seems to be doing OK. And even more importantly, we're in the middle of fourth quarter earnings. And Tech companies are doing really well. According to FactSet, more than 80% of them have beaten expectations, which is a good thing.
Are tech companies merely beating lowered expectations or showing real strength?
Are they beating lowered expectations?
Well, that is the thing. They're better than feared. And we all remember that after that, it came after that December 24th low for stocks. But Apple earlier this year did have that notorious lowered guidance where they issued a warning about demand in Asia. And that really set the stage for a lot of lowered expectations for how any company that made parts that went into the iPhone or also relied on demand from the Chinese consumer might also be struggling. And we haven't really seen that play out yet.
More immediately, Friday saw big gains. Was this because investors are less worried about trade tensions between the U.S. and China?
In part, yes, that is definitely true.
Did Friday's gains reflect reduced worries about a U.S.-China trade impasse?
Heading into Friday's trading session, we had reports about trade negotiators. They had week-long talks in Beijing, and they said that during negotiation, both sides were having a there was still a substantial gap between the concessions that China is willing to offer and what the Trump administration will accept. But they were upbeat in a sense that they're going to be having more conversations this coming week. And that seemed like some sort of progress. President Trump also, in his public remarks earlier on Friday, said that the U.S. is, quote unquote, close to a deal with China. So that also supported the idea that We're not likely to hit an impasse or not as likely to hit an impasse as maybe was feared a week or two ago.
I suppose in a glass-half-empty scenario, the optimism could be short-lived if U.S. and China trade negotiators don't reach a deal to forestall tariffs and the talks continue in Washington.
Yes. Yes, and investors, and we've spoken about this in past Fridays, that is a number one concern for investors we speak with, is that really high tariffs will be placed on items, and that could severely damage corporate earnings.
And I believe the deadline to reach a deal is March 1st.
Yes, it is. One of the things that I wrote about in the story on Friday was Citigroup analysts predict that 2019 global growth could be 0.2 percentage points slower if a deal isn't reached.
What economic risks could derail the market rally despite trade optimism?
So that speaks a bit to the stakes.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:10
2
How did U.S. markets perform on Friday and last week?
0:10–0:57
3
Why has the Nasdaq exited its 2018 bear market and rallied in 2019?
0:57–1:56
4
What factors have driven technology stocks' strong performance this year?
1:56–2:15
5
Are tech companies merely beating lowered expectations or showing real strength?
2:15–3:07
6
Did Friday's gains reflect reduced worries about a U.S.-China trade impasse?
3:07–4:46
7
What economic risks could derail the market rally despite trade optimism?
4:46–5:37
8
What key economic data and earnings should investors watch this holiday-shortened week?
5:37–6:49
Speakers
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