Wall Street Rally as U.S.-China Trade Tension Cools

By Joyce Yu

Philadelphia, PA–U.S. stocks opened higher on Monday after the United States and China put a potential trade war “on hold” to work on a wider agreement. The Dow soared 300 points in early trading. Analysts say sectors including technology and industrials are expected to gain today. Chipmakers, which have been in the eye of U.S. – China trade storm rallied – Intel was up 1.2% and Micron surged 4.7%

“I’m encouraged,” Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York, told the Reuters. “People view this trade war “on hold” as a positive. They are going to want to be back in the market.”

“Technology, industrials, energy, financials, and consumer discretionary are going to benefit today. You may include areas of the market that are involved in trade with China, I think that’s what’s going to help.”

Of the 30 Dow components, 29 went up. Heavy equipment makers Caterpillar and Deere gained more than 2%. Shares of Boeing, which sells about a fourth of its commercial aircraft to Chinese customers, were up 2.1%. On the contrary, stocks of airlines are under pressure due to rising oil prices. Europe’s biggest low-cost airline Ryanair reported a 10% increase in annual profits on Monday, but its shares dropped 1.1% in London after the open. The airline expects its profits to fall this year because of higher staffing and fuel costs.

To some companies, elevated oil price boost cost of operation, but to energy firms, oil price hikes mean higher earnings.  Oil prices advancing deeper into levels last seen in 2014 have driven further gains in the small energy companies that led the run in recent weeks. Energy shares within the S&P 600 small-cap index is up 31.3% for the quarter so far.

“Even though (energy stocks have) had a good run, estimates will be climbing because analysts are raising their oil forecasts. So even though the stocks go up, they can still look cheap because the earnings estimate is going to go up as fast as the stock,” Steve DeSanctis, equity strategist at Jefferies in New York, told Reuters.

J. Bryant Evans, portfolio manager at Cozad Asset Management in Champaign, Illinois, also said he has been buying shares of small-cap energy service providers.

“Some of the smaller energy service providers got banged up so badly when oil went down,” he said. “But the ones who survived have a real opportunity to grow and take market share now that oil is at $70 a barrel.”


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