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Stocks close higher as US considers easing tariffs on China

CNBC logo CNBC 1/17/2019 Fred Imbert

Stocks ended higher Thursday after a report said the U.S. could ease tariffs on Chinese goods.

That idea was floated by Treasury Secretary Steven Mnuchin, according to a Wall Street Journal report, which cited people close to the matter. The report, however, added that Mnuchin faced pushback from U.S. Trade Representative Robert Lighthizer, who thinks any concession could be seen as a sign of weakness.

The report sent stocks to their highs of the day, with the Dow Jones Industrial Average rising more than 250 points. The S&P 500 and Nasdaq Composite both rose about 1 percent following the report.

However, the major indexes came off their highs after a Treasury Department spokesperson working with the trade team told CNBC: "Neither Secretary Mnuchin nor Ambassador Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China. This an ongoing process with the Chinese that is nowhere near completion."

A senior administration official who participated in a trade meeting with the president on Wednesday later told CNBC that there is "discussion of lifting tariffs now." The official also said President Donald Trump "has no interest in making decisions now, it would put him in a weaker position."

The Dow closed up 162 points, lifting itself out of correction territory. The S&P 500 ended the day up 0.75 percent, while the Nasdaq climbed 0.7 percent.

"The good news is the reaction shows how much of a headwind the trade situation is on the market right now. It's like a coiled spring ready to react to a whiff of good news. The bad news is it needs to be more official and less floated," said Art Hogan, chief market strategist at National Securities.

Caterpillar shares spiked 2.2 percent, while Boeing jumped 2 percent. Caterpillar and Boeing shares are seen as bellwethers for global trade given their exposure to overseas markets. Apple also rose 0.6 percent.

Back in December, China and the U.S. agreed to stop slapping tariffs on each other's goods for 90 days while they tried to strike a deal on trade. Recent data has shown signs of weakness in China's economy.

Morgan Stanley reported earnings and revenue that fell short of Wall Street estimates. The company's results were dragged down by poor performances in its trading and wealth management businesses. Morgan Stanley shares fell 4 percent. Citigroup, J.P. Morgan Chase and Wells Fargo also reported quarterly earnings this week.

Thursday's moves came after the major indexes posted solid gains in the previous session, lifted by the sharp gains in Goldman Sachs and Bank of America. For the week, the major indexes are all up more than 1 percent.

"Upside should now prove limited for global indices, with S&P likely to start to weaken and pullback and any strength would face strong overhead resistance between 2630-40," said Mark Newton, managing member at Newton Advisors, in a note.

"Indices have moved between 10-15% in the last 15 trading days since Christmas Eve, and have finally reached the 50% retracement levels (or fractionally below) from the decline from September/October," he added. "Structurally this area remains difficult as several lows were made at this area and now offer resistance on this rally."


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