S&P notches weekly gain as jobs growth blows past forecasts

AP – Wall Street closed out a listless day on Friday with tiny gains and more record highs for the S&P 500 and Nasdaq.

The United States (US )and China revealed they have reached an initial deal in their long-running trade war. The “Phase 1” agreement means that the US won’t impose new tariffs on Chinese goods that had been set to kick in this weekend. Investors’ anxiety over the prospects of such an escalation in the trade war contributed to a sluggish start for the market this month.

US President Donald Trump and Chinese officials made separate statements confirming the agreement on Friday. Media reports signalling that a deal was close spurred a rally a day earlier that sent the S&P 500 and the Nasdaq to record highs. That likely led to the muted reaction in the markets on Friday.

“People obviously were excited about what they heard yesterday and now what you’re seeing is a consolidation now that it’s actually been confirmed,” said Head of the Traditional Investment Group at US Bank Wealth Management Lisa Erickson.

Technology companies, which rely heavily on China for sales as well as parts, led the gainers on Friday, outweighing losses in banks, energy stocks and elsewhere. Bond prices rose, pulling yields lower.

The S&P 500 index added a mere 0.23 points, or less than 0.1 per cent, to reach an all-time high of 3,168.80.

The Dow Jones Industrial Average inched up 3.33 points, or less than 0.1 per cent, to 28,135.38.

The Nasdaq, which is heavily weighted with technology stocks, rose 17.56 points, or 0.2 per cent, to 8,734.88.

The Russell 2000 index of smaller company stocks fell 6.84 points, or 0.4 per cent, to 1,637.98.

Optimism over the possibility of a trade deal helped stocks rebound after a downbeat start to the week. The S&P 500 ended the week with its third straight weekly gain. With less than three weeks left in 2019, the benchmark index is up 26.4 per cent for the year.

Specialist Gregg Maloney and trader John Panin work on the floor of the New York Stock Exchange.

The stock indexes were little changed through most of Friday as investors weighed the implications of the trade deal.

The costly trade conflict and the threat it could escalate at any moment has been the biggest source of uncertainty for Wall Street this year. The dispute has also hurt manufacturing around the world and caused US businesses to hold back on making investments. The saving grace for the economy has been a strong job market and consumer spending.

Word that Washington and Beijing were pursuing a limited deal helped allay some of those concerns this fall, which helped spur the market higher after a sharp pullback this summer. But investors grew anxious earlier this month as the December 15 planned rollout of US tariffs on USD160 billion worth of Chinese imports neared.

In addition to cancelling the new tariffs, the US also agreed to reduce certain existing import taxes on about USD112 billion in Chinese goods from 15 per cent to 7.5 per cent. In return, Trump said on Twitter, the Chinese have agreed to “massive” purchases of American farm and manufactured products as part of the initial deal.

It’s unclear how much the partial trade deal removes the uncertainty over another escalation in the dispute, which has had more than a few swings since it started 17 months ago.

“We got something, but until we have a full-fledged deal it may be tough to get excited,” said JJ Kinahan, chief market strategist for TD Ameritrade.

The latest development in trade relations didn’t have much of an impact on the market because it is essentially just a tariff truce, according to Jamie Cox, managing partner for Harris Financial Group. The next phase of the agreement will have to tackle some of the larger issues to provide relief from existing tariffs.

“It’s going to be a bigger lift in large part because the president doesn’t really want to take the tariffs off,” Cox said. “That’s going to require much more give on the Chinese part than what is currently in the offer.”

Technology sector stocks were the biggest winners Friday. Adobe climbed 3.9 per cent after its latest quarterly results topped Wall Street’s estimates.

Utilities, household goods makers and real estate stocks also notched gains.

Banks fell the most as bond yields, which are used to set the interest rates that lenders charge on mortgages and other consumer loans, fell. Wells Fargo slid 1.1 per cent.

The yield on the 10-year Treasury dropped to 1.83 per cent from 1.90 per cent late Thursday.

The government said US retail sales rose at a seasonally adjusted 0.2 per cent rate in November. The modest pace fell short of analysts’ forecasts for a pickup of 0.5 per cent and suggests the holiday shopping season got off to a slow start. Shares in several department store chains fell. Macy’s dropped 3.4 per cent, while L Brands slid 4.2 per cent and Nordstrom lost 3.3 per cent.

Facebook fell 1.3 per cent amid reports that the Federal Trade Commission could block the company from integrating its messaging apps. Facebook has been planning to integrate its messaging apps, including Messenger and WhatsApp, since early 2019. Federal regulators are concerned that the plan could make it hard to break up the company should the FTC find that necessary.

British stocks and the British pound moved sharply higher a day after a resounding victory for the Conservative Party eased uncertainty over the nation’s upcoming exit from the European Union. The benchmark FTSE 100 rallied 1.1 per cent. The British pound rose to USD1.3339 from USD1.3134. Other European markets also closed higher.

Benchmark crude oil rose 89 cents to settle at USD60.07 a barrel. Brent crude oil, the international standard, increased USD1.02 to close at USD65.22 a barrel. Wholesale gasoline rose three cents to USD1.66 per gallon. Heating oil climbed four cents to USD1.99 per gallon. Natural gas fell three cents to USD2.30 per 1,000 cubic feet.

Gold rose USD8.90 to USD1,475.60 per ounce, silver rose six cents to USD16.91 per ounce and copper fell one cent to USD2.78 per pound.

The dollar fell to JPY109.32 from JPY109.34 on Thursday. The euro strengthened to USD1.1121 from USD1.1112.