US Stocks Recover from Lackluster Session Amid Trump’s Flexibility on Trade Deadline

The major U.S. equity indexes posted a lackluster two-sided trade on Tuesday before finishing slightly better for the session. Investors came back from the extended holiday week-end with very little guidance. This created uncertainty which encouraged investors to trim positions and book profits. Late in the session, stocks mounted a strong comeback after President Trump hinted once again he may push back a key trade deadline.

On Tuesday, the benchmark S&P 500 Index settled at 2779.76, up 4.16 or +0.15%. The blue chip Dow Jones Industrial Average finished at 25891.32, up 8.07 or +0.03% and the technology-driven NASDAQ-100 Index closed at 7486.77, up 14.36 or +0.19%.

Sectors and Stocks

The S&P 500 Index was underpinned by a strong performance in the materials sector. The Dow Jones Industrial Average was supported by shares of Walmart which rose more than 2 percent after the company reported better-than-expected earnings before the opening bell. The retailer also reported e-commerce sales grew by 43-percent in the previous quarter. The NASDAQ Composite was boosted by more than 1 percent advances in shares of Amazon and Netflix.

Strong Upside Momentum

Last week, the Dow and the NASDAQ finished higher for an eighth straight week, while the S&P 500 notched its seventh weekly win out of eight. Furthermore, the S&P 500 Index is also trading above its benchmark 200-day moving average. Additionally, more than 50 percent of stocks in the index are above their 200-day moving average.

U.S.-China Trade

Despite starting the week with renewed concerns over U.S.-China trade relations, on balance the risks remained skewed to the upside. Last week’s high level negotiations in Beijing seemed to be a positive for the markets although no major details on the progress of moving toward a trade deal were released. All Treasury Secretary Steven Mnuchin said about the talks was “So far, so good.”

Talks between the two economic powerhouses are continuing this week. Ahead of the start of new talks in Washington, Trump said that trade talks with China are going well, adding the current March deadline is not a “magical date.” According to the original deal reached in early December between the U.S. and China, both countries have until March 1 to reach a new trade agreement, or the U.S. can impose additional tariffs on Chinese products.

Essentially, just the fact that both sides are talking seems to be enough to underpin the stock market. We haven’t seen any breakthrough at the talks, but then again no side has walked away. Trump’s comments on Tuesday provided just enough support to lift some of the uncertainty at the start of the trading week.