U.S. stocks kicked off the week trading higher on Monday as a big rally in Chinese shares and easing worries over Italy’s budget lifted investor sentiment.
The Dow Jones Industrial Average rose 12 points, led by gains in Intel. The S&P 500 climbed 0.1 percent as the technology sector outperformed. The Nasdaq Composite advanced 0.3 percent.
Shares of Jacobs Engineering rose 6.7 percent, while Caterpillar and Advanced Micro Devices climbed 0.6 percent and 4.4 percent, respectively. These companies have significant exposure to the Chinese market, so they benefit from strong economic growth there.
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The Shanghai Composite rose more than 4 percent to notch its best day since March 2, 2016. The sharp move higher comes after Chinese authorities pledged to support China’s economy and offset the negative impact of U.S. tariffs. They made that pledge after reporting weaker-than-expected economic growth for the second quarter.
“A deceleration in growth may put China more on the defense when it comes to trade negotiations, particularly relative to a US economy that continues to grow above trend,” said Katie Nixon, CIO at Northern Trust Wealth Management. “Trade is a key investment risk, and the resolution of the dispute with China may act as a drag for the foreseeable future.”
Chinese stocks are still down sharply this year despite Monday’s jump. The Shanghai Composite has plummeted about 20 percent in 2018 and is down 21.4 percent over the past year.
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Equities also gained after Moody’s downgraded Italy’s debt rating, but kept it just above junk rating. Over the weekend, Italian Finance Minister Giovanni Tria said he looks forward to “constructive” talks with the European Union over its budget. Italian bonds had been selling off amid worries over Italy’s budget, but on Monday rallied sharply.
Wall Street is trying to rebound from steep losses this month. The major indexes are all down at least 3.8 percent through Friday’s close amid fears of rising interest rates and a slowdown in the global economy.
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Investors also pored through a slew of corporate earnings on Monday.
Halliburton and offroad vehicle maker Polaris Industries both reported better-than-expected earnings before the bell Monday.
Several other companies are scheduled to report earnings this week, including Dow members 3M, McDonald’s, Caterpillar and United Technologies. Amazon and Alphabet are also set to report this week.
The current earnings season is off to a good start thus far. According to data from FactSet, 82 percent of the S&P 500 companies that have posted earnings have topped expectations.
Source: cnbc.com | Original Link