U.S. stock indexes surged on the first trading day of 2020, with bulls looking to build on the best year for the S&P 500 since 2013 as global equities rallied on a move by China’s central bank aimed at stimulating the country’s economy.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, +0.60% rose about 174 points, or 0.6%, to 28,712, while the S&P 500 SPX, +0.29% gained 10 points, or 0.4%, higher, to trade at 3,240. The Nasdaq Composite index COMP, +0.72% jumped 64 points, 0.7%, to touch 9,037. All three indexes hit fresh intraday highs in early morning action.
Financial markets in the U.S. and much of the world were closed Wednesday for New Year’s Day.
Wall Street ended 2019 on Tuesday with modest gains that capped a blockbuster year for equities. The S&P 500 SPX, +0.29% gained 28.9% and the Nasdaq COMP, +0.72%, up 35.2%, posted their strongest annual gains since 2013, while the Dow Jones Industrial Average DJIA, +0.60%, saw its biggest yearly advance since 2017, gaining 22.3%.
Need to Know: Irrational exuberance? Why last year’s stellar returns may have been a reversal of ‘excessive pessimism’
What’s driving the market?
Gains for U.S. stocks followed a rally for Asian and European markets that analysts attributed in part to the decision by China’s central bank to announce it would reduce the portion of deposits its commercial banks are required to set aside as reserves. The 0.5-percentage-point cut in the reserve requirement ratio by the People’s Bank of China will inject more than 800 billion yuan ($114.9 billion) into the financial system.
“The update from the PBOC helped Chinese stocks, and that positive sentiment spilled over to Europe,” said David Madden, market analyst at CMC Markets, in a note.
The Shanghai Composite Index SHCOMP, +1.15% and Hong Kong’s Hang Seng Index HSI, +1.25% each jumped 1.2%.
“China has been central to the rally in global stocks in recent weeks as last month it was revealed that Beijing and Washington, D.C., agreed phase one of the trade deal,” Madden added.
President Donald Trump on Tuesday announced he would sign a phase-one trade deal with China on Jan. 15.
Activity in China’s manufacturing sector grew at a slower rate in December but expanded for a fifth straight month, according to the final Caixin purchasing managers index for the sector, released Wednesday, which fell slightly to 51.5 from a November reading of 51.8.
“Bottom line, to use an old marketing analogy, in 2019 markets were successfully sold on the ‘sizzle’ that the trade truce and rate cuts will cause a global economic reflation,” said Tom Essaye, president of the Sevens Report. “Now, in 2020, it’s time to try the steak.”
In U.S. economic data, the number of people applying for first-time jobless benefits in the week ended Dec. 28 slipped to 222,000, matching the MarketWatch consensus forecast. The U.S. IHS Markit manufacturing purchasing managers final index for December slipped to 52.4, still a positive reading, but below the 52.6 reading notched in November.
Which stocks are in focus?
Shares of Apple Inc., AAPL, +1.57% which was the best performer of 2019, with an 86% gain, were up 1.7%.
Shares of Advanced Micro Devices Inc. AMD, +5.47% jumped 5.7% after Instinet analysts upped their price target by nearly 50%.
Shares of Tesla Inc. TSLA, +2.60% started the new year the way they ended 2019, with a rally, as some analysts expressed optimism regarding the upcoming release of the electric vehicle maker’s fourth-quarter production and delivery data.
Schlumberg Ltd. SLB, +0.31% shares ticked up 0.2% after an analyst price target increase. That follows an earlier recommendation for buying the stock from a Deutsche Bank analyst.
Chipotle CMG, +1.88% shares rose 1.9% as the restaurant is expected to relaunch its menu for 2020.
Fuel cell maker FuelCell Energy Inc. FCEL, -13.15% retrenched after a recent wild ride Thursday, with shares down about 12.2%
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How are other markets trading?
The 10-year Treasury note yield TMUBMUSD10Y, -2.24% slid 3 basis points to 1.89%.
Oil CLG20, -0.15% was on the decline, with West Texas Intermediate crude for February delivery falling 21 cents, or 0.3%, to about $61.00 on the New York Mercantile Exchange.
Gold was rising again, after marking the strongest year for the precious metal in nearly a decade. Gold for February delivery GCG20, +0.39% was up about 0.3% to $1,527.60.
The value of the U.S. dollar rose 0.5% relative to a basket of trading partners, according to the ICE US Dollar Index. DXY, +0.44%
In Europe, the Stoxx 600 SXXP, +0.93% closed 0.9% higher.
Read: Why U.S. dollar bears could be thwarted in 2020
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