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August 26, 2019

Dow rallies on trade optimism

By Anneken Tappe | CNN Business

The Dow and the broader stock market rose sharply higher Monday, reversing course from Friday's selloff after President Donald Trump said China wants to get back to the negotiating table.

The Dow rallied more than 1% Monday morning, up some 275 points. The S&P 500 and the Nasdaq Composite are meanwhile 0.9% and 1% higher.

All three stock indexes ended Friday in the red, logging their fourth down-week in a row.

China's Vice Premier Liu He said Monday that an escalation of the trade war would be bad for all parties and "the interest of the people in the world," while Trump said at the G7 summit in France "I think we're going to make a deal."

That also helped some of the European bourses higher, and the German Dax and the French CAC 40 moved up. UK markets are closed for the summer bank holiday.

The trade spat between the world's two largest economies escalated Friday, when China announced new tariffs on $75 billion worth of US imports. Trump tweeted his frustration in response to the tariffs and sent the stock market lower. After Friday's closing bell, Washington announced a new round of tariffs on Chinese imports starting October 1.

Those $250 billion goods currently hit with a 25% levy, will be taxed at 30%, while the remaining $300 billion worth of imports will be hit with a 15% tariff instead of 10%.

Despite the trade war tensions, one economic indicator showed the US economy remains resilient: Durable goods orders for July climbed 2.1% on the month, much more than expected. Excluding transportation, the orders are up 0.4%.

But that was counterbalanced with the Chicago Fed National Activity Index, which slipped further in July. It was down 0.4% compared with a flat reading in June. A negative index number represents below-trend growth.

"We believe the Chicago Fed National Activity Index remains the best indicator to gauge US recession risks," wrote Win Thin, global head of currency strategy at Brown Brothers Harrison, in a note to investors.

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