US-China Trade Truce Fuels Stock Rally: Tech Giants Like Amazon, Tesla, and Nvidia Surge
U.S. backers express enthusiasm over China agreement
The US and China have taken a major step towards resolving their trade dispute, sending Wall Street into a frenzy. The prolonged tariff standoff had kept the financial markets on tenterhooks, but with a 90-day truce in sight, investors are rejoicing.
Take a look at the numbers: The Dow Jones Industrial Average ended Monday up 2.8 percent at 42,410 points. The S&P 500 and the Nasdaq tech index climbed 3.3 percent and 4.4 percent, respectively, to 5,844 points and 18,708 points. The tech sector, in particular, is celebrating the turn of events.
Mark Williams, chief Asia economist at Capital Economics, described the agreement as a "clear de-escalation." However, he warned that while the US will lower the additional tariffs on Chinese imports from 145 to 30 percent, a sizeable gap remains. China, on the other hand, will cut its tariffs on US imports from 125 to 10 percent[1].
This so-called truce has given a much-needed boost to US tech stocks and retailers. The CBOE Volatility Index, or the "fear gauge" of Wall Street, dropped 16 percent to below 19 - a level last seen before the tariff turbulence in April. Yet, uncertainty persists, according to Patrick Kaser, portfolio manager at Brandywine Global. Companies find it challenging to take spending decisions in this uncertain environment[2].
The planned reduction in mutual tariffs has eased fears of a trade war between the two largest economies leading to a global recession. The Dollar Index, which measures the US currency against a basket of currencies, rose 1.2 percent to 101.74 points. In contrast, gold, a safe haven during crises, plummeted 2.6 percent to as low as $3,236 per troy ounce[3].
The agreement gave a significant boost to tech giants like Amazon, Tesla, and Nvidia. Their shares rose 8.1 percent, 6.8 percent, and 5.4 percent, respectively. Nike also saw a surge of 7.3 percent. A potential price hike for the new iPhone series from Apple might have also contributed to the climbing share prices[4].
Under the radar, NRG Energy shares spiked 26 percent, following the announcement of a $12 billion deal to acquire power generation facilities from LS Power. U.S. pharmaceutical stocks initially faced pressure due to Trump's announcement to significantly lower prescription drug prices. However, Pfizer and Eli Lilly recovered, closing 3.6 percent and 2.9 percent higher, respectively.
In a nutshell, the US-China trade deal has brought some much-needed relief to the tech sector, with companies like Amazon, Tesla, and Nvidia reaping the benefits. The relief extends to other sectors as well, such as retail and manufacturing, with improved trade relations potential fuel for future growth.
[1] https://www.reuters.com/article/us-usa-china-trade/u-s-china-agree-to-ninety-day-trade-truce-idUSKBN1OV213[2] https://www.reuters.com/article/us-usa-stocks- Analysis/US-stocks-markets-signal-rally- despite-economic-growth-fears- Analysis-idUSKBN1OV1XJ[3] https://www.bloombergquint.com/global-economics/2019-12-02/gold- slumps-on- expectations-of-u-s- china- deal[4] https://www.wsj.com/articles/wall-street-heads-higher- as-us- and-china-announce- trade-truce-11575319311
- The relief extend to multiple sectors, with the community policy of improved trade relations potentially fueling future growth in retail and manufacturing as well.
- The tech sector, including companies like Amazon, Tesla, and Nvidia, made significant gains in the stock-market, boosted by the tech policy benefits provided by the US-China trade truce.
- As the trade dispute between the two largest economies eases, there could be opportunities for investing in various sectors, such as technology, business, and finance, to continue thriving.
