U.S. Stocks Boosted by Multi-Billion-Dollar Arms Deal

U.S. equity markets posted strong gains on Monday with no distractions from President Trump, other than to monitor the progress of his first foreign trip since taking office.

In the cash market, the Dow Jones Industrial Average finished the session at 20894.83, up 89.99, or +0.43%. The bench market S&P 500 Index closed at 2394.02, up 12.29, or +0.52% and the tech-based NASDAQ Composite settled at 6133.16, up 49.46 or +0.81%.

Trump visited Israel and Palestine on Monday. One-day earlier he visited Saudi Arabia, where he inked a multi-billion-dollar arms deal. Defense-related stocks popped on the back of the deal, with the iShares U.S.-Aerospace & Defense ETF (ITA) rising about 0.9 percent.

The news of the arms deal seemed to be the only item causing any reaction from investors. Traders had no reaction to another successful ballistics test by North Korea over the week-end, and former FBI Director James Comey’s testimony before the Senate Intelligence Committee after Memorial Day.

U.S. Economic News

There were no major U.S. economic reports released Monday with many traders looking ahead to the release of the minutes from the Federal Reserve’s meeting on May 3. The minutes are scheduled for release on Wednesday.

Several Fed members gave speeches on Monday with none giving any hints that they were concerned about the impact from U.S. political turmoil.

Crude Oil

U.S. West Texas Intermediate and internationally-favored crude oil prices traded firm on Monday on the expectation that an OPEC-led production cut would be extended to next March, but analysts said economic slowdown was clouding the mid-term outlook for crude markets.

Gold

June Comex Gold inched higher on Monday after its biggest weekly rise in five weeks. Political turmoil in the United States is fuelling demand for gold bullion as a safe haven asset as well as reduced expectations of aggressive U.S. interest rate hikes this year.

Forex

The U.S. Dollar was under pressure again on Monday. The political turbulence in Washington was behind some of the selling. Investors fear that the political drama will derail Trump’s efforts to deliver tax reform and fiscal stimulus, if not his presidency.

The dollar also lost ground against the Euro after Germany’s Angela Merkel prefaced a summit of G7 leaders later this week by saying a “too weak” currency was behind her country’s massive trade surplus. Merkel said, “The Euro is too weak … due to the ECB’s policy and with this, German goods are comparatively cheap.”