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Dow tops 26,000 again, notches 9-week winning streak

CNBC logo CNBC 2/22/2019 Fred Imbert and Ryan Browne

Stocks ended higher Friday as another round of trade talks between the U.S. and China wrapped up with investors increasingly more hopeful a deal will be struck.

The Dow gained 181 points as Intel outperformed. The 30-stock index also broke above 26,000 for the first time since early November and posted its ninth consecutive weekly gain, its longest streak since May 1995. The Nasdaq advanced 0.9 percent as shares of Facebook, Amazon, Netflix and Alphabet all closed higher. The tech-heavy Nasdaq also notched its ninth straight weekly gain, its longest streak since May 2009.

The small-caps Russell 2000 gained 0.9 percent and recorded its longest weekly winning streak since 1996.The S&P 500 climbed 0.65 percent, led by gains in the tech sector.

Stocks have been off to a roaring start to the year. The major indexes are all up at least 11 percent in 2019 as the Federal Reserve indicates it will be patient in raising rates. Hopes the U.S. and China end their trade skirmish has also boosted equities. The gains also follow a massive drop in equities to end 2018.

“It’s pretty extraordinary the amount of gain that we’ve had,” said Thomas Thornton, the founder and president of Hedge Fund Telemetry. But “many of my indicators are showing very overbought conditions now with more and more upside exhaustion signals.”

“I really wish I could pick a sector that had defensive qualities right now, but everything has gone up so dramatically that when the pullback comes, it will probably be widespread,” Thornton said.

President Donald Trump met with Chinese Vice Premier Liu He on Friday. Liu delivered a letter to Trump saying Chinese President Xi Jinping hopes the two countries can redouble efforts to strike a trade deal. The major indexes fell from their session highs on those comments.

Trump’s meeting with Liu on Friday comes after a U.S. delegation met with Xi last week. Sources told CNBC that Trump and Xi are also discussing a summit at Mar-a-Lago late in March.

“This is constructive not just for the market but also for the global economy,” said Quincy Krosby, a chief market strategist at Prudential Financial. A deal “would help the Chinese economy stabilize. That obviously helps the global economy.”

“It has a broader impact than the bilateral U.S.-China relations,” Krosby said.

Optimism has risen over the chances of both countries securing a deal to end their protracted trade war, but some experts say the most difficult part is yet to come.

“There’s obviously an incentive for both sides to reach a deal,” James Athey, a senior investment manager at Aberdeen Standard Investments, told CNBC “Squawk Box Europe ” on Friday. “The problem is that you’re now getting to the more difficult part of the negotiation, which is things like the IP (intellectual property) problem.”

Trade tensions between the U.S. and Europe are also increasing. The European Union is preparing to target heavy machines made by U.S. companies like Caterpillar if the U.S. slaps tariffs on cars made in the EU, according to a Bloomberg News report. Shares of Caterpillar dipped before the bell on the report, but traded slightly higher after the open.

The Trump administration is threatening to slap tariffs of up to 25 percent on European autos and auto parts.

“The markets may find that, as soon as they get out of the frying pan with respect to China, they may find themselves back in the fire with respect to Europe,” said Bruce McCain, chief investment strategist at Key Private Bank. “For that reason, this market that has risen very sharply and very quickly in a world that has not resolved all of its problems, could lead to some disappointment.”

“It’s not like we need to be discouraged and raise tons of cash, but I think that the optimism in the market is probably overdone at this point,” McCain said.

Intel shares rose more than 2 percent on Friday after Morgan Stanley upgraded the stock to overweight from equal weight, noting Intel could get a boost now that Bob Swan is the full-time CEO.

Shares of Kraft Heinz plummeted 27.46 percent after the consumer products company disclosed an SEC subpoena from an investigation into its accounting practices. The company also disclosed a $15.4 billion write down.

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