Wall Street ends third straight day higher on trade optimism

• CBOE Volatility  Index drops 10% on Thursday.
• President Trump hints at a possible trade deal to boost the sentiment.
• Trade-sensitive sectors lead the gains.

After starting the day in a relatively quiet manner, major equity indexes in the U.S. gained traction on the back of an improved market sentiment and closed the day decisively higher to start November on a positive note. Although today’s data from the U.S. showed that the manufacturing sector was losing momentum due to Trump administration’s trade policy, President Trump’s latest remarks revived the hopes of a trade deal between China and the U.S.

Commenting on the data, “Though the ISM Manufacturing Index has slipped from its post-recession high, the current level of the gauge and its components remain securely in expansion. There is nothing in this indicator that suggests an incipient decline in the US manufacturing sector,” said Joseph Trevisani, a senior analyst at FXStreet.

“Just had a long and very good conversation with President Xi Jinping of China. We talked about many subjects, with a heavy emphasis on Trade. Those discussions are moving along nicely with meetings being scheduled at the G-20 in Argentina,” US President Trump tweeted on Thursday. The CBOE Volatility Index, Wall Street’s fear gauge, fell for the third straight day to reflect the positive market mood.

The trade-sensitive S&P 500 Materials and Industrials indexes added 3% and 1.7%, respectively, on a daily basis. The only major sector that closed the day in the negative territory on Thursday was the so-called defensive S&P 500 Utilities, which lost 0.53%.

The Dow Jones Industrial Average gained 265.05 points, or 1.06%, to 25,380.81, the S&P 500 added 28.6 points, or 1.05%, to 2,740.34 and the Nasdaq Composite rose 128.16 points, or 1.75%, to 7,434.06.

DJIA technical outlook by FXStreet Chief Analyst Valeria Bednarik

The Dow has managed to advance above its 200 SMA in the daily chart, also above a bearish 20 SMA, which nears the larger one. The Momentum indicator in the mentioned chart is retreating from its mid-line, while the RSI advances, now around 49. For the shorter term, and according to the 4 hours chart, the index offers a bullish stance, having recovered above the 20 and 100 SMA, while technical indicators lack directional strength, but hold near daily highs at overbought territory.

Support levels: 25,301 – 25,254 – 25,210.

Resistance levels: 25,400 – 25,441 – 25,490.