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Dow rises more than 150 points on new US-China trade hopes

Stocks jumped Wednesday following the latest twist in the US-China trade saga, but the enthusiasm cooled off...

Posted: Dec 13, 2018 2:22 AM
Updated: Dec 13, 2018 2:22 AM

Stocks jumped Wednesday following the latest twist in the US-China trade saga, but the enthusiasm cooled off toward the end of the day.

President Donald Trump suggested that he could use the arrest of Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, as a bargaining chip in trade talks. Trump told Reuters in an interview Tuesday that he'd consider getting involved in Meng's case if it could help move trade talks along.

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"If I think it's good for the country, if I think it's good for what will be certainly the largest trade deal ever made -- which is a very important thing -- what's good for national security -- I would certainly intervene if I thought it was necessary," Trump said.

The Dow surged more than 450 points at one point before pulling back as the day progressed. The Dow finished Wednesday up only 157 points, led by gains in US companies with significant exposure to China, such as Apple (AAPL), Boeing (BA), Caterpillar (CAT) and 3M (MMM).

The S&P 500 and Nasdaq ended the day higher as well but also finished near their lowest points of the day. Nonetheless, the rally helped push the Dow and S&P 500 closer to breakeven territory for the year. The Nasdaq is up nearly 3% in 2018.

China's Shanghai Composite and Hong Kong's Hang Seng also rallied Wednesday. And shares of leading Chinese companies that trade in the United States -- including Alibaba (BABA), Baidu (BIDU) and JD (JD) -- were all higher.

Stocks also got a lift from a Wall Street Journal report that suggested China is looking to soften some of its protectionist stances and allows more access to the Chinese market for US and other foreign companies.

The market has been extremely volatile for the past few weeks, rising and falling with the latest headlines about what's next for US-China trade relations.

But some experts are shaking off the turmoil.

"Volatility doesn't strike us as anything out of the ordinary," said Thomas Cole, CEO of Distillate Capital, a Chicago-based investment manager.

"Is there something looming that will cause corporate cash flows to be in trouble? It doesn't seem like there is anything egregious," Cole said.

Stephen Lee, a portfolio manager with Logan Capital, added that the uncertainty with trade talks has created some good values for investors, who should be focusing less on day-to-day headlines and more on corporate earnings.

"Fundamentals will drive things more next year. Merit starts to matter," said Lee, adding that Nike (NKE), Amazon (AMZN) and MasterCard (MA) are companies that look attractive.

Tencent Music makes its NYSE debut

The newfound optimism about China trade talks could give a much needed boost to the initial public offering of Tencent Music as well. Tencent Music, which is owned by Chinese tech giant Tencent, debuted on the New York Stock Exchange Wednesday.

Shares of Tencent Music rose nearly 10% but the company raised less money from the IPO than it had planned. The Tencent Music (TME) IPO also comes at a time when tech stocks in general, and top streaming music rival Spotfiy, are struggling.

Spotify (SPOT) went public earlier this year and its stock is trading below its offering price. Spotify's stock was flat Wednesday.

Trade talks with China and Chinese stocks weren't the only thing investors were watching Wednesday though. Wall Street was also keeping a close eye on the latest developments with the UK and Brexit.

British Prime Minister Theresa May won a no-confidence vote in Parliament late Wednesday. Despite the UK uncertainty, the FTSE 100 index as well as markets throughout Europe ended the day higher.

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