U.S. Stocks Climb, Led by Retailers and Smaller Companies

Traders work on the floor of the New York Stock Exchange (NYSE) on January 7, 2019. (Reuters/Brendan McDermid)

U.S. stocks are rising Monday as retailers and small companies rally after a report showed strong orders for service companies in December. Those companies make up the bulk of the U.S. economy.

Representatives from the U.S. and China began another round of trade negotiations. U.S. stocks soared more than 3 percent Friday as investors reacted to those upcoming talks as well as a report showing strong hiring by U.S. employers. They also responded positively to comments from Federal Reserve Chairman Jerome Powell. That wiped out a large loss from the day before.

KEEPING SCORE: The S&P 500 index rose 22 points, or 0.9 percent, to 2,554 as of noon Eastern time. The Dow Jones Industrial Average climbed 153 points, or 0.7 percent, to 23,586. The Nasdaq composite gained 79 points, or 1.2 percent, to 6,818. The Russell 2000 index jumped 22 points, or 1.6 percent, to 1,403.

Any progress on ending a dispute that has resulted in both sides imposing tariffs on billions of dollars of each other’s exports would be welcomed in the markets. The South China Morning Post, citing a person familiar with the matter, reported that Trump plans to meet Chinese Vice President Wang Qishan on the sidelines of the World Economic Forum in Switzerland later this month.

SURVEY SAYS: The Institute for Supply Management said an index of new orders for service companies rose last month. Overall, U.S. service firms kept growing, although the pace of that growth slowed somewhat.

Amazon rose 3 percent to $1,621 and Home Depot picked up 2.3 percent to $177.61. Automakers also rose, with General Motors up 3.5 percent to $34.51 and Ford gaining 1.7 percent to $8.22.

A report last week from the ISM, which is a group of purchasing managers, contributed to the market’s big loss Thursday after it showed U.S. manufacturing grew at the weakest pace in two years.

SHAKING THE TREE: Dollar Tree rose after activist investment firm Starboard Value disclosed a stake in the discount retailer and pushed the company to consider changes, including selling the Family Dollar business it bought in 2015. Starboard also said Dollar Tree should consider raising prices on some items. It nominated seven candidates for seats on Dollar Tree’s board of directors.

The stock climbed 5.6 percent to $98.11.

POWER FAILURE: The parent company of Pacific Gas & Electric plunged after Reuters reported that the company might file for bankruptcy protection as it faces potentially huge liabilities connected to deadly wildfires in California. The cause of the Camp wildfire hasn’t been determined, but PG&E reported an outage around the time and place it began. The fire killed at least 86 people and destroyed 15,000 homes. PG&E also faces lawsuits related to wildfires in 2017.

The company’s stock dropped 20.8 percent to $19.33. PG&E stock traded at almost $70 a share in October 2017 and was valued at about $48 in November 2018.

LILLY AND LOXO: Eli Lilly will buy Loxo Oncology for about $8 billion as it bulks up on cancer treatments that target gene abnormalities. Lilly is known for insulins including Humalog but has emphasized cancer drugs over the past several years, and one of its top-selling products is the cancer treatment Alimta. Loxo soared 65.9 percent to $232.06 and Eli Lilly rose 0.7 percent to $115.48.

That makes the second big pharmaceutical acquisition announced in the new year. On Thursday, Bristol-Myers Squibb agreed to buy Celgene for $74 billion in cash and stock, one of the largest drug industry acquisitions of all time.

POLITICAL RISKS: The partial shutdown of the U.S. government stretched into its third week and there were few signs of progress in staff-level talks over the weekend. That means many hundreds of thousands of federal workers aren’t getting their paychecks, which could slow the economy.

Meanwhile British legislators will vote next week on proposed terms for Britain’s departure from the European Union. The government of Prime Minister Theresa May agreed to a deal with European Union leaders in November, but a Parliamentary vote on the package was canceled because it was clear it would be rejected. It’s not clear if PM May will be able to get the proposal through Parliament next week. That raises the possibility that the U.K. will leave the European Union without any kind of economic deal, which could have severe effects on the British and European economies.

ENERGY: Oil prices continued their recent rally. U.S. crude rose 2.9 percent to $49.34 per barrel in New York. After sinking to $42.53 a barrel on Dec. 24, its lowest price since June 2017, the price of U.S. crude has risen for seven of the last eight trading days and climbed 16 percent over that time. Brent crude, used to price international oils, was up 1.9 percent to $58.16 per barrel in London.

BONDS: Bond prices fell. The yield on the 10-year Treasury note rose to 2.68 percent from 2.65 percent.

CURRENCIES: The dollar fell to 108.53 yen from 108.51 yen. The euro rose to $1.1466 from $1.1400. The British pound rose to $1.2757 from $1.2740.

OVERSEAS: Germany’s DAX shed 0.3 percent and the FTSE 100 in Britain fell 0.5 percent. The CAC 40 in France was also 0.5 percent lower.

Japan’s Nikkei 225 index gained 2.4 percent, while South Korea’s Kospi rose 1.3 percent. Hong Kong’s Hang Seng climbed 0.8 percent.