Amazon and Netflix contributed greatly to Monday’s second straight session of gains, as the resumption of U.S.-China trade talks helped ease concerns that have pummeled the market in recent months.
China has the “good faith” to work with the United States to resolve trade frictions, China’s Foreign Ministry said, while Commerce Secretary Wilbur Ross said he saw “a very good chance that we will get a reasonable settlement” as the two countries started their first face-to-face talks since a 90-day truce was agreed in December.
Nine of the 11 major S&P sectors rose. The consumer discretionary index was the largest gainer, risng 2.36 percent, led by a 3.44 percent gain in Amazon. That made Amazon Wall Street’s most valuable company at $797 billion, eclipsing Microsoft’s market capitalization, which reached $784 billion following a 0.13 percent gain in the price of its shares.
Netflix, the second-largest contributor to the S&P 500’s increase on Monday, ended the trading day up 5.97 percent. High-profile technology and consumer stocks have rebounded after falling sharply in the final quarter of 2018.
The S&P energy index gained 1.29 percent as oil prices rose on support from OPEC production cuts. The Philadelphia Semiconductor index, which includes a number of companies that are dependent on China for revenue, rose 1.95 percent.
The utilities fell 0.71 percent, dragged lower by PG&E’s 22 percent share price decline. Apparently, the California utility is exploring filing for bankruptcy protection related to potential liabilities from wildfires. However, the suggestion of such an action could also be aimed at trying to coerce aid from the State of California.
With earnings season approaching, investors expect a slowdown in fourth-quarter earnings growth, and they will scrutinize forecasts for signs of further weakness.
Analysts now estimate S&P 500 companies to increase their fourth-quarter earnings per share by 15 percent. That compares with expectations of 20 percent growth three months ago, according to Refinitiv IBES data. The estimate for 2019 profit growth has fallen to about 7 percent from 10 percent.
Dollar Tree rose 5.46 percent after activist investor Starboard Value LP called on the retailer to sell its underperforming Family Dollar business and proposed replacing most of its board.
Loxo Oncology was up 66.33 percent after Eli Lilly indicated it would acquire the cancer drug developer for about $8 billion.
Approximately 8.1 billion shares changed hands on the major domestic equity exchanges, a number that was below the 9.0 billion share average over the pffvast 20 trading days.
Services Sector Slows
Growth in the services sector of the economy slowed to a five-month low during December, signaling that the economy is decelerating faster previously expected, according to a report released on Monday by the Institute for Supply Management.
The ISM said its barometer on the domestic services sector fell to 57.6 last month from 60.7 in November. The latest reading was the lowest since July when it was 55.7. However, a reading above 50 suggests the services sector is expanding.
The decline in the services sector’s growth followed ISM’s data released last week that indicated manufacturing industries experienced a sharp deceleration at year-end to their weakest level in two years.
Some details on the services sector were also downbeat. For example, the employment sub-index fell to 56.3 in December, the lowest since July, from 58.4 in November.
The prices paid gauge dropped to 57.6, the lowest since July 2017, from 64.3 in November.
Yet, the latest reading on new orders offered a bright spot, coming in at 62.7 in December, up slightly from 62.5 the month before.