Strong Energy Sector, Trade Talk Optimism Boost U.S. Equity Indexes

The major U.S. stock indexes continued to climb on Wednesday as investors increased bets that high-level U.S. and Chinese trade negotiators would reach an agreement before a March 1 deadline. Given the current balanced fundamentals, optimism that a trade deal will get completed in a timely manner is having the greatest influence on the markets at this time.

In the cash market, the benchmark S&P 500 Index settled at 2753.03, up 8.30 or +0.31%. The blue chip Dow Jones Industrial Average finished at 25543.27, up 117.51 or +0.48% and the tech-based NASDAQ Composite closed at 7420.38, up 5.76 or +0.08%.

Trade Talk Optimism Supportive

Underpinning the markets is the news that both major economic powerhouses are still talking, but fueling the rally are two key factors. Firstly, on Tuesday, President Donald Trump said he might be open to postponing the current deadline of early March to give both sides enough time to reach a deal. Secondly, on Wednesday, the South China Morning Post reported that Chinese President Xi Jinping will meet with U.S. delegates on Friday. The U.S. delegation includes Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer.

Stock market bulls may be taking a big chance reading into these events because if the U.S. walks away from these talks still miles away from making a deal then the U.S. would impose higher tariffs on Chinese goods starting on March 2.

Energy Sector Gains Boost S&P 500 Index

As far as the major indexes are concerned, the S&P 500 Index was boosted by solid gains in the industrials and energy sectors. The energy sector was supported by higher energy stocks, which were boosted by higher oil prices. Strong performances in shares of Newfield Exploration, Apache and Devon Energy were primarily behind the strength in the sector.

Oil prices were boosted on Wednesday after Saudi Arabia’s Energy Minister Khalid al-Falih said production will fall below 10 million barrels per day in March. Buyers primarily ignored the stronger-than-expected build in U.S. crude oil stocks. According to the U.S. Energy Information Administration, U.S. crude stockpiles climbed by 3.6 million barrels in the week-ending February 8, higher than the 2.1 million barrel forecast.

Earnings Season Winding Down

In one of the last few major companies to report this earnings season, Hilton Worldwide beat expectations, sending the stock higher by more than 6 percent. The company attributed the better-than-expected earnings to higher hotel-room rates.

Analysts at Morgan Stanley said higher copper prices could boost earnings at Freeport-McMoRan. This led to an upgrade of the stock which fueled a nearly 7 percent gain.