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Stocks close higher for a fourth consecutive session

CNBC logo CNBC 12/16/2019 Fred Imbert

Stocks ended at record highs Monday, capping their fourth straight gain as a so-called phase one trade deal between China and the U.S. cleared the path higher for Wall Street to end a banner year.

The Dow closed 100 points higher, while the S&P 500 gained 0.7% and the Nasdaq added 0.9%.

“This has been the thing that, personally, I’ve been looking for all year,” Kim Forrest, the founder of Bokeh Capital, said, referring to the trade agreement. “Increased trade is going to allow companies to start spending again on capital expenditures. That had been frozen, and most of most of those are technology purchases.”

Tech shares rose 0.9% and hit a record, led by a 3.4% gain in Micron Technology and a 4.1% jump in Western Digital. Goldman Sachs helped the Dow reach an all-time high, rising 1.4%.

Sentiment was also lifted by strong economic data out of China. Chinese industrial production rose 6.2% in November on a year-over-year basis, topping expectations. Retail sales in China also jumped 8% last month.

The U.S. and China announced Friday they will move forward with a so-called phase one trade deal. As part of the agreement, the U.S. will roll back some levies on Chinese products and China will increase its purchases of U.S. agricultural products. Treasury Secretary Steven Mnuchin said will be inked in January.

“This should put to rest for the time being the ‘trade war’ volatility factor in markets, which has become a dominant theme over the past year and a half,” said Eleanor Olcott, a China policy analyst at TS Lombard, in a note. “This brief interlude of calm for the China-US relationship presents some investment opportunities.”

Stocks posted solid gains last week in anticipation of the agreement. News of the deal comes after a record-setting rally from mid-October throughout November. It is also the latest market headwind that is at least temporarily resolved.

Last week, the Federal Reserve indicated it will keep rates at current levels through 2020. In the U.K., Prime Minister Boris Johnson’s Conservative Party secured a massive parliamentary victory, giving momentum to the country’s divorce plans from the European Union.

President Donald Trump tweeted about the market’s record-setting performance on Monday, saying: “New Stock Market high! I will never get bored of telling you that – and we will never get tired of winning!”

However, some caution remains as details on key aspects of the trade deal, such as agricultural purchases and the U.S. trade deficit, remain unclear. U.S. Trade Representative Robert Lighthizer has, however, assured that the deal is “totally done.”

“I know the American farmer is happy that they’re going to get back their previously largest customer,” said Peter Boockvar, a chief investment officer at Bleakley Advisory Group. “But, getting to the numbers that the administration is hoping for in the next year will be tough.”

Monday’s gains were kept in check by a 2.8% drop in Boeing. Shares of the aerospace giant fell after The Wall Street Journal reported Sunday the company was nearing a decision on possibly halting or cutting production of the 737 Max.

The report follows Federal Aviation Administration chief Steve Dickson telling CNBC last week the 737 Max jet’s return was unlikely to be cleared until 2020. “There are a number of processes, milestones, that have to be completed,” Dickson said. “If you just do the math, it’s going to extend into 2020.”

On the data front, the National Association of Home Builders/Wells Fargo Housing Market Index rose in December to its highest level in 20 years. Meanwhile, data from IHS Markit showed U.S. business activity hit a five-month high in December.

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