Trump trade remarks boost US stocks

Technology stocks pushed the benchmark S&P 500 index to an all-time high and the Nasdaq close to its record level, as a possible US-China trade deal and rising bets on a third rate cut by the US Federal Reserve fuelled optimism.

Shares of Microsoft gained more than 2% and provided the biggest boost to all three main indexes after the technology giant won the Pentagon’s $10bn (€9bn) cloud computing contract, beating Amazon.

The S&P 500 rose as much as 0.7% to 3,044.08, breaching the record level hit in July, while the Nasdaq was less than 0.5% below its all-time high. The Dow Jones Industrial Average was more than 1% away from its life high.

“We are going to maybe trade up a little bit higher in the short term and (pull back) after the earnings season and the rate cut,” said Robert Pavlik, senior portfolio manager at SlateStone Wealth in New York.

US president Donald Trump said he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing.

That added to last week’s optimism when Washington said it was “close to finalising” some parts of a trade agreement with China. The news comes as a relief to investors who have been reeling from the impact of the trade war and its fallout on the US economy.

Adding to the upbeat mood, the Fed is expected to widely cut interest rates at its two-day policy meeting, which ends tomorrow. The odds for a quarter percentage point cut in US borrowing costs have jumped to 94% from 49% last month, according to CME Group’s FedWatch tool.

“One of the reasons they are cutting interest rates is not because they are trying to get ahead of a slowdown but because they are worried about the impact of the trade and tariff issues,” Mr Pavlik said.

The third-quarter earnings season has managed to ease some concerns related to the impact of the trade tensions on Corporate America.

“But if earnings keep beating forecasts, and if the US and China avoid a fresh fallout, then the outlook for equities into year-end still looks positive,” said Chris Beauchamp at online broker IG.

Reuters and Irish Examiner