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Stocks stage major reversal, close higher on positive trade rhetoric
10-May-19 16:15 ET
Dow +114.01 at 25942.37, Nasdaq +6.35 at 7916.92, S&P +10.68 at 2881.40

https://www.briefing.com/investor/markets/stock-market-update/2019/5/10/stocks-stage-major-reversal-close-higher-on-positive-trade-rhetoric.htm

[BRIEFING.COM] U.S. stocks staged a major reversal on Friday, climbing from steep losses to modest gains. The S&P 500 was down as much as 1.6% on persisting trade uncertainty, but positive trade rhetoric helped lift the benchmark index to a gain of 0.4%.

The Dow Jones Industrial Average (+0.5%), the Nasdaq Composite (+0.1%), and the Russell 2000 (+0.2%) also finished higher after being down as much as 1.4%, 1.9%, and 1.5%, respectively.

Ten of the 11 S&P 500 sectors swung positive, led by utilities (+1.7%), materials (+1.3%), and consumer staples (+1.2%). The lone exception was the health care sector (-0.1%).

President Trump fueled early trade angst when he said there was no need to rush a deal after the tariff rate on $200 billion of Chinese imports was raised to 25% from 10% early Friday. He added that the U.S. was working on another set of 25% tariffs on $325 billion of Chinese imports.

The persisting trade uncertainty prompted broad-based selling in equities and general efforts to de-risk. The S&P 500 also fell below its 50-day moving average (2862). Selling conviction abated soon after the conclusion of the current round of trade negotiations in Washington.

Treasury Secretary Steven Mnuchin described the talks as "constructive," and China's Vice Premier Liu He said they went "fairly well." Bloomberg indicated sources that said the discussions produced little progress, but the positive-sounding comments helped spark a rebound attempt.

The U.S. is also reportedly giving China three to four more weeks to reach a deal, which helped provide some clarity on a timeline and improve optimism about the prospects for a deal. President Trump said that talks will continue in the future, and that tariffs may or may not be removed depending on the outcome of these discussions.

The rally caught investors off guard, especially considering that nothing concrete in terms of plans was established. Nevertheless, it prompted short-covering activity that helped strengthen the recovery attempt. The S&P 500 was able to close above its 50-day moving average.

In corporate news, Uber (UBER 41.57, -3.43, -7.6%) made its public debut on Friday, although the price action was much more subdued than past IPOs this year. Shares opened at $42 after pricing at $45 per share, which was already at the lower end of the $44-$50 range.

U.S. Treasuries finished little changed after backing off their morning highs. The 2-yr yield declined two basis points to 2.24%, and the 10-yr yield was unchanged at 2.46% The U.S. Dollar Index was little changed at 97.33. WTI crude declined 0.1% to $61.66/bbl.

Reviewing Friday's economic data, which included the Consumer Price Index for April and the Treasury Budget for April:

Total CPI increased 0.3% m/m in April (Briefing.com consensus 0.4%) while core CPI, which excludes food and energy, rose just 0.1% (Briefing.com consensus 0.2%) for the third consecutive month. That left the yr/yr increases at 2.0% and 2.1%, respectively.
The key takeaway from the report is that it will keep the Fed in a neutral state of policy-setting mind and the market in an uncertain state over what the Fed's next move will be -- and when.
The Treasury Budget for April showed a surplus of $160.3 billion versus a surplus of $214.3 billion for the same period one year ago. The Treasury Budget is not seasonally adjusted, so the April surplus cannot be compared to the $146.9 billion deficit for March.
The fiscal year-to-date deficit is $530.9 billion versus a deficit of $385.4 billion for the same period ago.The budget deficit over the last 12 months is $924.4 billion, versus $870.5 billion for the 12 months ending in March.

Looking ahead, investors will receive the NFIB Small Business Optimism Index for April and Import and Export Prices for April on Tuesday.

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Russell 2000 +16.6% YTD
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Dow Jones Industrial Average +11.2% YTD