Dow Jones Inches Closer to 28,000 on Renewed Trade Deal Hopes

The Dow Jones closed in the green yesterday on risk appetite. It was up 147.0 points or 0.53% at 27,649.8 as 23 stocks out of 30 finished higher than where they started.

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Gainers and Losers

Gains were led by JPMorgan Chase which was up 1.97% followed by 3M which posted a 1.19% gain. In third was Apple gained 1.18%. On the other hand, the losers were: Boeing (-0.92%), Cisco (-0.88%), Visa (-0.71%), Disney (-0.20%), Walgreen (-0.14%), IBM (-0.10%), and Intel (-0.09%).

Market Sentiment Switches to Risk Appetite

Risk appetite was triggered by a Bloomberg report that said that the US and China are moving closer to a trade deal. This was contrary to initial reports which said that US President Donald Trump was not in a hurry to sign a deal with China. Concerns were also heightened by the passing of the Uighur Act of 2019 which aims to take a stronger stance in Xinjiang where over a million Muslims are held in re-education camps. People close to negotiations say that the two countries could sign a phase one deal before the December 15 deadline. It was also mentioned that the Uighur Act as well as the Hong Kong Democracy and Rights bill has not and will not affect negotiations.

Disappointing US Data

Market participants were in a risk-on mood that not even worse-than-expected economic data from the US could keep them from buying into equities. The ADP non-farm employment change report sorely missed forecasts. It printed at 67,000 versus the 137,000 consensus. This raised some concerns that the official government-produced Non Farm Payrolls report, which is due on Friday, may also disappoint forecasts. It is one of the most closely-tracked reports by the Federal Reserve and negative figures could force the central bank to reconsider futher easing.

The ISM non-manufacturing PMI report also disappointed. The actual figure printed at 53.9 versus the 54.5 forecast. While this figure is still above the 50.0 baseline reading which indicates expansion, it is lower than October’s reading at 54.7.

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Dow Jones Outlook

There are no top-tier data due for release from the US today. This probably means that the Dow Jones will take its cue from market sentiment.

If risk aversion dominates, the stock index could trade lower to its previous highs around 27,252.4. On the other hand, if risk appetite is sustained in today’s trading, the Dow Jones could rally back up the 28,000 psychological handle.

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