A gauge of world stock markets recovered from early lows to inch higher on Tuesday as China cut its growth targets to a 30-year low but added more stimulus, while strong U.S. economic data put the dollar on track to notch its fifth straight day of gains.
Stocks on Wall Street traded in a similar fashion, with the benchmark S&P 500 just above the unchanged mark as investors looked for developments on trade between the United States and China. Positive retail earnings from Target and data on the U.S. services and housing sectors helped provide support to the upside.
“Even though (China) have cut their growth forecast, the market is still holding its own, that is a positive. The implication is investors are expecting some sort of trade agreement to be signed, which could then be beneficial,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
The Commerce Department said sales of new U.S. single-family homes rose to a seven-month high in December while a reading from the Institute for Supply Management showed an acceleration in growth in the vast services sector in February.
The S&P 500 index has struggled to hold above the 2,800 level, which has proven to be a stiff resistant point. Still, the index is up nearly 19 per cent from its Dec. 24 low.
“There is an old saying that round numbers are like rusty doors and require several attempts before finally breaking open,” said Stovall.
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The Toronto Stock Exchange’s S&P/TSX Composite index was unofficially up 48.41 points, or 0.3 per cent, at 16,086.54.
Six of the index’s 11 major sectors were higher.
The health care sector rose 4.4 per cent as Aurora Cannabis Inc. jumped 12.5 per cent and Cronos Group Inc. sat 11.1 per cent higher.
The energy sector rose 0.3 per cent, while the financials sector inched up 0.1 per cent.
The materials sector, which includes precious and base metals miners, also added 0.4 per cent, as copper prices rose after China, the top consumer in the world, unveiled economic stimulus measures including tax cuts for manufacturing industry, bolstering the demand outlook.
European shares bounced between modest gains and declines, eventually closing slightly higher in the wake of China’s response to the lowered growth target of between 6.0 to 6.5 per cent for 2019, which includes billions of dollars in planned tax cuts and infrastructure spending and a lack of news on the trade front.
The Dow Jones Industrial Average fell 13.02 points, or 0.05 per cent, to 25,806.63, the S&P 500 lost 3.16 points, or 0.11 per cent, to 2,789.65 and the Nasdaq Composite dropped 1.21 points, or 0.02 per cent, to 7,576.36.
Investors are watching to see if the S&P 500 can breach 2,800, a level which the index has traded near for several sessions.
“When you are here at that important level in the S&P 500, it’s healthier to see the market slow down, pause, take account of the micro and the macro and absorb the good news,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
Communication services led gains among the 11 S&P 500 sectors, while industrials fell the most.
The consumer discretionary sector rose 0.2 per cent, led by a 7.3-per-cent gain in Kohl’s and 4.6-per-cent gain for Target following those retailers’ respective earnings reports.
Both forecast 2019 profit above Wall Street estimates.
In other corporate news, General Electric shares dropped 4.7 percent as the conglomerate surprised investors by forecasting a net cash outflow from its industrial businesses this year. GE shares were among the biggest drags on the S&P 500.
Fatigue after a strong run higher for equities is playing a role in the recent pause. MSCI’s All Country World Index shed 0.05 per cent, but has now risen about 15 per cent from its near two-year closing low on Dec. 24. The index is trading at 14.6 times expected earnings, on par with levels back in early October, when a global bear market began to take hold.
The pan-European STOXX 600 index rose 0.27 per cent.
In currency markets, the greenback was lifted by the economic data and is now up nearly 0.9 per cent over the past five sessions.
The dollar index, tracking the unit against six major currencies, rose 0.16 per cent, with the euro down 0.29 per cent to $1.1304.
Oil prices held near flat on Tuesday as the market wavered on expectations that the United States and China would reach a trade agreement as early as this month while awaiting U.S. government crude inventory data.
Investors also weighed OPEC-led efforts to tighten crude supply against the restart of Libya’s biggest oilfield and the prospect of weaker demand from China.
Brent, the international benchmark, settled at $65.86 a barrel, up 19 cents. U.S. West Texas Intermediate crude settled at $56.56 a barrel, down 3 cents.
“Oil is still waiting for a deal to come back to table with China,” said Phillip Streible, senior commodities strategist at RJO Futures.
Reuters