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Stock Market News For Oct 2, 2018

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U.S. stock markets closed mostly higher on Monday as the United States, Canada and Mexico reached an agreement to sign a new trade deal replacing NAFTA. This new trilateral trade deal boosted market participant’s confidence due to elimination of some trade-related concerns. The Dow and S&P 500 ended in the positive territory while Nasdaq Composite finished in the red.

The Dow Jones Industrial Average (DJI) closed at 26,651.21, advancing 0.7% or 192.90. The S&P 500 Index (INX) gained 0.4% to close at 2,924.59. However, the Nasdaq Composite Index (IXIC) closed at 8,037.30, declining 0.1%. A total of 6.86 billion shares were traded on Monday, lower than the last 20-session average of 6.89 billion shares. Decliners outnumbered advancers on the NYSE by 1.34-to-1 ratio. On the Nasdaq, decliners had an edge over advancers by 1.88-to-1 ratio. The CBOE VIX decreased 1% to close at 12.0.

How Did the Benchmarks Perform?

The Dow ended in positive territory for the third straight day. Notably, 23 components of the 30-stock blue-chip index finished in the green while seven ended in the red. However, the tech-laden Nasdaq Composite closed in the red reversing its two-day winning streak.

The S&P 500 was also up led by an increase of 1.4% in Energy Select Sector SPDR (XLE), 1.1% gain in Materials Select Sector SPDR (XLB) and 0.9% rise in Industrials Select Sector SPDR (XLI).  Notably, six out of 11 sectors of the benchmark index finished in positive territory while five ended in the red.

USMCA Replaces NAFTA

On Sep 30, the United States and Canada reached a landmark deal, which replaces the North American Free Trade Agreement (NAFTA). The new trilateral agreement will now be called the United States-Mexico-Canada Agreement (USMCA). Notably, Mexico has already given its nod in August.

The agreement was sealed after a year of tense negotiations and uneasy ties between President Trump and Canada’s president Trudeau. It also came just before the midnight deadline imposed by the United States and saw both sides making significant concessions.

Per the new agreement, Canada has agreed to provide the U.S. dairy industry with access to around 3.5% of its domestic dairy market. Against this, Canada will be able to protect its lumber companies and other industries from U.S. anti-dumping duties.

Canada has also agreed to limit its auto exports to the United States to 2.6 million vehicles. This will help it avoid a 25% U.S. tariff on auto imports in case the Trump administration goes on to impose such a duty. Automakers will be hugely relieved by the terms of the agreement since it protects production facilities and supply chains, which extend across Canadian, Mexican and U.S. borders.

Consequently, shares of major auto makers like Ford Motor Co. (F - Free Report) , General Motors Co. (GM - Free Report) and Fiat Chrysler Automobiles N.V. (FCAU - Free Report) increased 0.8%, 1.6% and 2.7%, respectively. Ford carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

On Oct 1, the Institute for Supply Management (ISM) reported that the U.S. manufacturing index for September was pegged at 59.8, in line with the consensus estimate. However, this figure was below the August’s reading of 61.4, which was the highest since May 2004. The monthly decline was mainly due to a sharp fall in the new orders sub-index, which came down to 61.8 in September from 65.1 in August. Notably, any reading above 50 indicates overall growth of the manufacturing sector.

The Department of Commerce reported that U.S. construction spending for the month of August was up 0.1%, missing the consensus estimate of a rise of 0.4%. Construction spending was up 6.5% year-over-year in September. July’s reading was revised upwardly to a gain of 0.2% from previously given data of a rise of 0.1%.

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