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Wall Street Closes Higher, Led by Rally in Semiconductors
03-Apr-19 16:25 ET
Dow +39.00 at 26218.13, Nasdaq +48.86 at 7897.54, S&P +6.16 at 2873.40

https://www.briefing.com/investor/markets/stock-market-update/2019/4/3/wall-street-closes-higher-led-by-rally-in-semiconductors.htm

[BRIEFING.COM] The S&P 500 advanced as much as 0.6% on Wednesday amid optimism about a U.S.-China trade deal and positive PMI non-manufacturing data out of China and Europe. The benchmark index fell into negative territory in afternoon action, however, succumbing to some selling interest after coming within 50 points of its all-time high. The S&P 500 managed to finish higher by 0.2%.

The Nasdaq Composite gained 0.6%, propped up by many components within the Philadelphia Semiconductor Index (+2.3%), which rallied on some positive industry indications. The Dow Jones Industrial Average gained 0.2%, and the Russell 2000 gained 0.5%.

The S&P 500 materials (+1.3%), information technology (+0.8%), and consumer discretionary (+0.7%) sectors outperformed the broader market. Conversely, the energy (-1.0%), consumer staples (-0.6%), and industrial (-0.3%) sectors underperformed.

Market participants responded favorably to a Financial Times report indicating the U.S. and China were nearing a final trade deal, although issues pertaining to enforcement mechanisms and forced technology transfers still need to be ironed out. Trade talks between high-ranking U.S. and Chinese officials resumed in Washington today.

Semiconductor stocks were strong all day following a Digitimes report suggesting Taiwan Semi (TSM 41.79, +0.52, +1.3%), which is the largest contract semiconductor foundry, is seeing a rebound in chip orders. Optimism that better economic activity could be on the horizon, and that a trade deal could be worked out soon, also fueled buying interest in this growth-oriented space that has leading-indicator status.

Advanced Micro Devices (AMD 29.02, +2.27, +8.5%) and Intel (INTC 55.48, +1.12, +2.1%) provided the group with some influential support after both were initiated with a Buy rating at Nomura/Instinet. AMD also benefited from Digitimes suggesting it will see a significant increase in sales in the second half of the year while Intel got an added boost from the news that it named a new CFO.

Shares of Facebook (FB 173.54, -0.66), on the other hand, came under pressure following a Bloomberg report regarding a privacy slip-up. The report indicated a cyber security firm discovered Facebook user information was "inadvertently posted publicly on Amazon.com Inc.'s cloud computing servers" in plain sight. FB shares lost 0.4% after being up as much as 2.2% prior to the report.

Dow component Caterpillar (CAT 139.26, -0.93, -0.7%), meanwhile, was downgraded to Hold from Buy at Deutsche Bank, which based its recommendation in part on its view that global synchronized growth has "collapsed" and that Europe is slowing more than expected.

U.S. Treasuries closed on a lower note, pushing yields higher in a curve-steepening trade. The 2-yr yield increased one basis point to 2.32%, and the 10-yr yield increased four basis points to 2.52%. The U.S. Dollar Index declined 0.3% to 97.11. WTI crude lost 0.3% to $62.42/bbl.

Reviewing Wednesday's economic data, which included the ISM Non-Manufacturing Index for March, the ADP Employment Change report for March, and the weekly MBA Mortgage Applications Index:

The ISM Non-Manufacturing Index (NMI) for March dropped to 56.1% (Briefing.com consensus 57.9%) from 59.7% for February. The dividing line between expansion and contraction is 50.0%. The March reading is the lowest level for the index since December 2017.
The key takeaway from the report is that every index component was at 50.0% or higher in March. The drop in March, then, suggests non-manufacturing sector activity increased, only at a slower pace than the prior month.
ADP Employment Change report for March showed an estimated 129,000 positions were added to private-sector payrolls (Briefing.com consensus 178,000) following an upwardly revised 197,000 (from 183,000) for February.
The weekly MBA Mortgage Applications Index surged 18.6% following an 8.9% increase in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report on Thursday.

Nasdaq Composite +19.0% YTD
Russell 2000 +15.8% YTD
S&P 500 +14.6% YTD
Dow Jones Industrial Average +12.4% YTD