U.S. stocks chartered new all-time highs on Tuesday and were on pace for their fifth straight winning day as a so-called phase one trade deal between China and the U.S. makes way for a move higher for Wall Street to end a banner year.
The trade war has had markets on a roller coaster of emotions all year, but analysts are more optimistic that this deal may mitigate investors’ fears.
“This should put to rest for the time being the “trade war” volatility factor in markets, which has become a dominant theme over the past year and a half,” said Eleanor Olcott, China policy analyst at TS Lombard, in a note. “This brief interlude of calm for the China-US relationship presents some investment opportunities.”
As the Dow Jones Industrial Average traded 37 points higher today at 28,273.15 as of 11:07am Eastern; the highest Dow close was on Monday at 28,235.89.
“We’re getting a running start on the Santa Claus rally,” said Stovall. Stovall said historically stocks often hit the low of the month in mid-December, before rallying into the rest of the year.
With expiration of futures contracts coming shortly, S&P 500 barely scraped out a point increase on Friday, but ended the week with a gain of 0.7% at 3,168. The Dow Jones Industrial Average finished the day just 3 points higher, at 28,135, but ended the week with a gain of 0.4%. The DJIA is up about 20% for the year so far while the S&P is up 26.4% for the year.
Sentiment was also lifted by robust economic data out of China and strong hombuilder data. Chinese industrial production rose 6.2% in November on a year-over-year basis, beating expectations. Retail sales in China also jumped 8% last month.
Meanwhile, the National Association of Home Builders’ monthly confidence index showed a five point increase to 76 in December from an upwardly-revised 71 the month prior, the trade group said Monday. December’s number demonstrates the highest index reading since June 1999.
“We’ve got an explosive combination of monetary and fiscal policy right now,” infamous trader Paul Tudor Jones told CNBC’s “Squawk Box” recently. “We’ve got a 5% budget deficit coupled with the lowest real rates that you can image with the economy at full employment. That’s the most unorthodox, and potentially explosive, combination that you can imagine.”
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