Stocks rose sharply on Wall Street Tuesday as traders cheered news that the leaders of the U.S. and China will meet face to face next week to discuss their long-running trade dispute.
President Donald Trump said he will hold talks with Chinese President Xi Jinping at an international summit in Japan. Investors are hoping for any positive sign in the trade war between the world’s largest economies. U.S. businesses have implored Trump to stop escalating the trade war and refrain from expanding his tariffs to $300 billion on goods from China.
European markets jumped after the head of the European Central Bank said it was ready to cut interest rates and provide other economic stimulus if necessary. That puts the spotlight on the Federal Reserve, which is set to announce its own decision on interest rates Wednesday.
Technology companies including Apple and chipmakers like Intel and Nvidia rose sharply. Google’s parent company, Alphabet, led communications and internet stocks higher. Banks including JPMorgan Chase and Bank of America rose.
Industrial and consumer-related stocks also made big gains. General Electric, Caterpillar, and Nike all rose. Utilities and consumer products companies lagged the market in a sign that investors were stepping back from the safe-play sectors and taking on more risk.
KEEPING SCORE: The S&P 500 index rose 1% as of 1 p.m. Eastern time. The Dow Jones Industrial Average rose 340 points, or 1.3%, to 26,453. The Nasdaq, which is heavily weighted with technology companies, rose 1.5%. The Euro Stoxx 50 rose 2.1%
ANALYST’S TAKE: A prospective meeting between the U.S. and China’s leaders is welcome news for a market that has been searching for some direction.
“If you think back a week ago, there was a fear they wouldn’t even talk at all,” said J.J. Kinahan, chief market strategist at TD Ameritrade.
Kinahan said investors should remain focused on some of the more fundamental factors impacting the U.S. economy. “This is when you have to be a little bit careful, the day-to-day news is what can drive the market,” he said.
FED WATCH: Investors are keeping a close watch on The Federal Reserve this week as they bet the central bank is headed for its first interest rate cut in over a decade.
Chairman Jerome Powell has previously signaled that the central bank will consider a rate cut if economic growth is threatened by the ongoing trade war between the U.S. and China. It is meeting Tuesday and will release a statement Wednesday.
Most analysts say they think economic growth has slowed sharply in the April-June quarter to around a 1.5% percent annual rate, only half the pace of the past year.
Investors collectively envision a Fed rate cut by July and possibly further cuts after that. Some are even betting on a rate cut this week. Many economists, though, think the Fed will wait until September at the earliest to announce its first drop in its benchmark short-term interest rate since 2008 and might not cut again in 2019. A few Fed watchers foresee no rate cut at all this year.
BONDS: U.S. government bond prices rose sharply, sending yields lower. The yield on the 10-year Treasury note fell to 2.04%, below the 2.08% it traded at late Monday. That’s still well below the 2.20% yield on the three-month Treasury bill.