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Stocks close little changed after Trump-Kim summit

CNBC logo CNBC 6/12/2018 Thomas Franck


Stocks ended little changed Tuesday after President Donald Trump and North Korea leader Kim Jong Un signed an agreement aimed at establishing a "peace regime" on the Korean peninsula and better relations between the two states.

Lack of detail in the agreement about the path to denuclearization on the peninsula kept the market's gain in check.

The Dow ended flat, while the S&P 500 eked out a 0.17 percent gain. The Nasdaq outperformed, rising more than 0.5 percent on strength in Netflix and Alphabet.

"I don't think there's any surprises here, which is why the markets aren't reacting that much," said Paul Tudor Jones, the famed and reclusive hedge fund manager who called the October 1987 market crash. "We've been trading it the past 12 months leading up to this point so this is semi-anticlimactic."

However, Tudor Jones added that a big rally in stocks was coming later this year.

Trump said the sanctions will remain on Pyongyang remain in place until "the menace of nuclear weapons" is gone. Japan's Nikkei 225 rose 0.3 percent on hopes for greater peace in the region.

AT&T shares rose 0.3 percent Tuesday ahead of U.S. District Court Judge Richard Leon's decision on whether to permit its $85 billion deal for Time Warner. While the government or AT&T could appeal Leon's decision, the ruling will have far-reaching implications for dealmaking across the telecommunications and media world.

Several other players in the industries, including Twenty-First Century Fox and Disney, are actively pursuing deals of their own; others, like Verizon, could interpret the ruling as a go-ahead to buy a large content company to compete with AT&T.

Asked to comment on movement in equity markets, Tudor Jones said he believes the U.S. stocks will rally near the end of this year.

"I think we'll see rates move significantly higher beginning some time late third quarter, early fourth quarter," Tudor Jones told Andrew Ross Sorkin. "And I think the stock market also has the ability to go a lot higher at the end of the year. ... I can see things getting crazy particularly at year-end after the midterm elections ... to the upside."

Gold fell 0.3 percent to $1,299 an ounce and the dollar rose 0.2 percent against the Japanese yen.

Investors are also awaiting the culmination of the U.S. Federal Reserve's two-day meeting, which is set to conclude on Wednesday.

Fed Chair Jerome Powell and his colleagues are expected to announce a quarter-point increase in interest rates as the central bank seeks to normalize monetary policy with the economy showing signs of health.

Closely watched consumer pricing data, often viewed as an inflation barometer, increased 2.8 percent in the 12 months through May, the biggest advance since February 2012, after rising 2.5 percent in April.

A slowdown in the climb of gasoline prices helped dampen the movement upward, though core CPI, which excludes volatile food and energy costs, also rose 0.2 percent. The year-over-year increase in core CPI is now 2.2 percent.

"It does seem as though this trend of low inflation is evolving a little," said Michael Arone, chief investment strategist for State Street Global Advisors. "The economic data has been good, but in order to hike rates a fourth time this year, you're going to have to see a big pick-up in economic growth."

U.S. Treasurys yields rose following the report, with the benchmark 10-year note rate climbing 2 basis points to 2.98 percent.

"What the market wants to know regarding the Fed is whether they want to see a fourth rate hike, do they even see it as a possibility," said Quincy Krosby, chief market strategist at Prudential Financial. "There are those who suggest the economy will gain momentum, but there are those who think the economy is not strong enough."

"The point is every time we have rate hikes, emerging markets come under pressure," Krosby said. "It reminds me of an old trading floor adage: When rates rise, something always breaks."

While U.S. markets have remained comparatively calm over the past two weeks, stricter monetary policy from the Fed, as well as more hawkish commentary from the ECB, appeared to stress certain debt-heavy economies like those of Italy and Brazil.

Concerns about global credit contagion weighed on financial stocks two weeks ago after a populist rift in Italy threatened to prevent the country from forming a government. The developments spurred dormant fears concerning the stability of the euro zone and default risk concerning Italy's €2.3 trillion ($2.68 trillion) in debt.


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