I commented over the weekend that today would be the day we find out how the market reacts to the trade agreements reached between Trump and China in Buenos Aires on Saturday.  Was it as great as it looked or was something being overlooked?  At first glance, it would appear the reaction was very positive, but a closer look reveals a somewhat different story.  If the market really believed that this agreement was going to fly, the expectation was that the Dow would have gone up a good deal more than 300 points since the trade war has been the primary wet blanket on the market for months.  If you look at the intraday chart, you’ll see that the index went up over 440 points right out the gate.  That represented all the pent-up energy the market gathered since Saturday.  Then by noon most of those gains were lost with the index diving over 300 points, then started gathering steam again to close up the 287 at the end.  What does all this mean? 

The consensus seems to be that this was not an end but just a very good first step to ending the tariff war.  It was a truce to delay further escalation for 90 days but investors are still apprehensive that we’ll be right back where we started in 90 days.  Thus, today was a celebration of what they’re calling “a bit of a relief rally” but with the full knowledge that “there are still some very sticky issues” and “there are still a lot of question marks and it’s only 90 days.”  Still, it was not bad news and the entire market including tech, energy, and industrials got a big boost.  Oil also benefited from the Canadian news that Alberta will be cutting production (while OPEC is still thinking about it.)  The S&P which has had two 10 percent corrections this year is now back in the black to the tune of a 4.4 percent gain for 2018.  Iffy good news is still a lot better than bad news and investors responded by exchanging a very healthy 8.4 billion shares. 

mon  DECEMBER 3, 2018 / 5:49 pm 

Relief rally boosts Wall Street on U.S.-China trade truce

Lewis Krauskopf

DJ:  25,826.43  +287.97       NAS:  7,441.51  +110.98        S&P:  2,790.37  +30.20     12/3

(Reuters) - Wall Street’s major indexes rallied on Monday following a truce between the United States and China in their trade dispute, which has clouded the outlook for the stock market for much of the year.  The benchmark S&P 500 .SPX climbed more than 1 percent, building off of its biggest weekly percentage gain in nearly seven years a week ago.  Investors were lifted by news over the weekend that U.S. President Donald Trump and Chinese President Xi Jinping agreed during talks in Argentina to hold off on new tariffs for 90 days, declaring a truce following months of escalating tensions on trade and other issues.

“Today is mostly about celebrating the fact that the U.S. and China have delayed what could have been some of the worst-case scenarios regarding their trade relations,” said Michael Arone, chief investment strategist at State Street Global Advisors.  Still, major indexes closed below their highs from earlier in the session.  Arone noted that “there are still some very sticky issues that need to be resolved” between the world’s two biggest economies.  Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta, called it a “bit of a relief rally.”  “The reason why you are not seeing more, why the market has probably come off the highs, is after the dust settles, people realize there are still a lot of question marks and it’s only 90 days for them to negotiate,” he said. 

The Dow Jones Industrial Average .DJI rose 287.97 points, or 1.13 percent, to 25,826.43, the S&P 500 .SPX gained 30.20 points, or 1.09 percent, to 2,790.37 and the Nasdaq Composite .IXIC added 110.98 points, or 1.51 percent, to 7,441.51. 

Last week, the S&P 500 gained 4.8 percent as investors interpreted commentary from the Federal Reserve as signaling that U.S. interest rate hikes may be less aggressive than feared. The index rebounded after confirming its second 10 percent correction of the year, and is now up 4.4 percent in 2018. 

On Monday, the technology sector .SPLRCT, among the groups seen as sensitive to trade tensions, gained 2.1 percent. Apple (AAPL.O) shares, recently hit by worries over possible tariffs on iPhones, gained 3.5 percent.  Shares of Boeing (BA.N) and Caterpillar (CAT.N), two industrial companies viewed as trade bellwethers, gained 3.8 percent and 2.4 percent, respectively, and gave a lift to the blue-chip Dow. The industrial sector .SPLRCI rose 1.2 percent.  Energy shares .SPNY rose 2.3 percent as oil prices bounced back from their recent swoon. Along with the U.S.-China trade detente, oil got support as Canada’s Alberta province ordered a production cut, while exporter group OPEC looked set to reduce supply.  In corporate news, shares of Tesaro (TSRO.O) soared 58.5 percent after GlaxoSmithKline (GSK.L) agreed to buy the U.S. cancer specialist for $5.1 billion.  Tribune Media Co (TRCO.N) shares rose 11.7 percent after Nexstar Media Group Inc (NXST.O) said it agreed to buy its Chicago-based peer for about $4.1 billion, making it the largest regional U.S. TV station operator. Nexstar shares rose 6.9 percent. 

Advancing issues outnumbered declining ones on the NYSE by a 2.96-to-1 ratio; on Nasdaq, a 1.88-to-1 ratio favored advancers.  The S&P 500 posted 44 new 52-week highs and 1 new low; the Nasdaq Composite recorded 73 new highs and 81 new lows. 

About 8.4 billion shares changed hands in U.S. exchanges, above the 7.6 billion daily average over the last 20 sessions.