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Stock Market News For Jun 19, 2019

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U.S. stocks closed sharply higher on Tuesday after President Trump’s said he will meet his Chinese counterpart during the G-20 summit which boosted investors’ confidence. Moreover, market participants are also expecting a signal from the Fed for a rate cut in the next month. All three major stock indexes finished at their highest level since May 7.

The Dow Jones Industrial Average (DJI) soared 1.4% or 353.01 points to close at 26,465.54. The S&P 500 climbed 1% to close at 2, 179.75. Meanwhile, the Nasdaq Composite Index closed at 7,953.88, surging 1.4%. The fear-gauge CBOE Volatility Index (VIX) decreased 1.3% to close at 15.15. A total of 7 billion shares were traded on Tuesday, higher than the last 20-session average of 6.8 billion. Advancers outnumbered decliners on the NYSE by a 4.83-to-1 ratio. On Nasdaq, a 3.80-to-1 ratio favored advancing issues.

How Did The Benchmarks Perform?

The Dow closed in positive territory with 23 components of the 30-stock blue-chip index closing in the green while seven finished in the red. The S&P 500 also closed in positive territory.The Industrials Select Sector SPDR (XLI) and Technology Select Sector SPDR (XLK) gained 1.9% and 1.8%%, respectively. Notably, eight out of 11 sectors of the benchmark index closed in the green while three ended in the red. Meanwhile, tech-heavy Nasdaq Composite ended in positive territory due to strong performance by large-cap stocks especially semiconductor stocks.

Positive Development on Trade War Front

On Jun 18, President tweeted that he had a very good telephonic conversation with Chinese President Xi Jinping. He added: “We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting.” The G-20 summit of developed nations is scheduled for Jun 28-29 at Osaka.

Notably, U.S.-China trade negotiations broke down abruptly on May 5 when market participants believed a near-term deal was possible. The United States blamed China for backtracking on its previously given commitments. So far, the United States has imposed 25% tariffs on $250 billion Chinese goods. China has retaliated by levying 25% tariff on $160 billion U.S. exports.

Moreover, China has warned it will stop exporting precious rare earth metals to the United States while the Trump administration has blocked Chinese telecom behemoth Huawei from doing business with U.S. companies. Additionally, President Trump had threatened imposing 25% tariffs on another $300 billion of Chinese goods if stalemate prevails in trade negotiations for an indefinite time period.

Following Trump’s tweet, shares of trade-sensitive stocks like Caterpillar Inc. (CAT - Free Report) , Deere & Co. (DE - Free Report) and 3M Co. (MMM - Free Report) soared 2.3%, 3.3% and 3.1%, respectively. Caterpillar and Deere carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Crucial Fed Meeting Begins

The two-day policy meeting of the Fed started on Jun 18. Fed Chair Jerome Powell is expected to announce his decision on rates at 2 PM EST on Jun 19.Possibility of a rate cut after the June meeting is very low.However, market participants will be more interested in Powell’s speech scheduled Wednesday afternoon. His statement is likely to reveal much about the central bank’s future policy stance.

As per CME FedWatch most respondents are expecting three rate cut in 2019, in July, September and December, respectively. So far this year, the central bank has maintained its benchmark lending rate at 2.25—2.5%.

Economic Data

Department of Commerce reported that housing starts declined 0.9% in May to a seasonally adjusted annual rate of 1.269 million units, owing to adrop in the construction of single-family housing units. However, the figure surpassed the consensus estimate of 1.235 million units. April’s data was revised upward to 1.281 million units from 1.235 million units stated earlier.

Building permits rose 0.3% to a rate of 1.294 million units in May. However, the figure fell below the consensus estimate of 1.299 million units. April’s data was revised downward to 1.29 million units from 1.296 million units stated earlier.

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