Markets closed in the green on Wednesday after the Trump administration was said to be considering delaying the imposition of auto tariffs for the next six months. This development came a day after U.S. – China trade rhetoric cooled off to an extent. Moreover, these reports also more than offset weak economic data from both the United States and China. The three major benchmarks closed in the green.
The Dow Jones Industrial Average (DJI) increased 0.5%, to close at 25,648.02. The S&P 500 increased 0.6% to close at 2,850.96. The tech-laden Nasdaq Composite Index closed at 7,822.15, gaining1.1%. The fear-gauge CBOE Volatility Index (VIX) decreased 10.2% to close at 16.22. Advancers outnumbered decliners on the NYSE by a 2.05-to-1 ratio. On Nasdaq, a 1.48-to-1 ratio favored advancing issues.
How Did the Benchmarks Perform?
The Dow amassed 116 points to close in the green. Gains for the 30-stock index were broad-based and supported by a rally in the shares of Verizon (VZ - Free Report) and Boeing (BA - Free Report) , which gained 0.5% and 0.8%, respectively. Both the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 added 16.6 points to end in positive territory. The broader index rallied on the back of broad-based gains for the communication services and tech stocks. Of the 11 major sectors of the S&P 500, eight ended in green, with communication services leading the advancers. The Communication Services Select Sector SPDR Fund (XLC) increased 2.2% on Wednesday.
Meanwhile, the Nasdaq rallied 87.6 points to close in the green. Shares of Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) gained 4.1% and 1.2%, respectively and supported gains for the Nasdaq.
Trump to Delay Auto Tariffs
Following a cooldown in trade rhetoric between the United States and China on May 14, with President Trump referring to the tariff dispute as a “squabble,” markets had multiple reasons to rally on Wednesday.
Per a CNBC report, the Trump administration was planning to defer tariffs on automobile imports by as much as six months. Such developments led to a broad-based rally in automobile stocks. Shares of Ford (F) and General Motors (GM) gained 1.2% and 0.9%, respectively.
Experts believe such a development couldn’t have come at a better time as this would be instrumental in stopping a global trade spat. The White House has a deadline till May 18 to make a decision on whether to impose auto tariffs on auto imports from the European Union (EU) and Japan due to national security concerns.
Post this deadline, the administration would have another six months to come to a decision on auto tariffs. Such developments also somewhat offset tensions related to the U.S.-China trade dispute.
Weak Economic Data Turns Investors Jittery
On the economic data front, U.S. retail sales for the month of April, fell 0.2%. This weighed on investor sentiment and gave rise to that the U.S. economy was slowing down amid trade war concerns. Meanwhile, the NY Empire State Index increased to 17.8, its highest settlement in the past six months.
However, industrial production for the month of April declined 0.5%. The consensus estimate for the period was for an increase of 0.1%. Further, capacity utilization came in at 77.9%, below the consensus estimate of 78.7%.
Economic data from China was also lackluster. China’s industrial production rose only 5.4% year-over-year in April, its slowest pace of growth since May 2003.
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