Wall Street kicks back on trade war headline Turnaround-Tuesday

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  • DJIA, climbed 382.20 points, or 1.48%, at 26,279.91
  • Nasdaq Composite index climbed 152.95 points, or 1.95%, to 8,016.36.
  • S&P 500 index added 43.23 points, or 1.5%, to 2,926.32.

On Tuesday, positive US-China trade headlines sent the markets risk-on for a turnaround Tuesday that sent US benchmarks screaming higher on Tuesday. Communications between the US and China seem to be back online with a number of headlines confirming that talks were taking place over the phone and arrangements were being laid out for subsequent continuation meetings in September.  Additionally, the Trump administration said it will delay imposing the 10% tariff on some Chinese products until mid-December. Subsequently, the Dow Jones Industrial Average, DJIA, climbed 382.20 points, or 1.48%, at 26,279.91 for the best performance on a single day in two months. The S&P 500 index added 43.23 points, or 1.5%, to 2,926.32. The Nasdaq Composite index climbed 152.95 points, or 1.95%, to 8,016.36.

US data 

The US Consumer Price Index was falling in line with market expectations in July at 0.3% m/m, pushing annual inflation up 0.2%pts from June to 1.8%.

Core inflation (ex food and energy) was a touch stronger than expected, also at 0.3% m/m, which saw the annual measure lift to 2.2% from 2.1% in June. While there appears to be some temporary strength in the details (airline fares, tobacco), two consecutive 0.3% m/m rises for core inflation may give some policy makers cause to believe inflation pressures are a touch stronger than previously assumed. Meanwhile, the US July NFIB Small Business Optimism index almost fully retraced last month’s dip on the back of improved expectations about the economy and business conditions. The temporary trade truce and record stock prices are said to have supported, so it will be interesting to see how August’s read holds up,”

analysts at ANZ bank wrote. 

DJIA levels

The DJIA index found support on the 200-DMA last Wednesday and yesterday’s lows were unbreached with a spike to test the doji’s highs (a 50% reversion of the late July swing highs to recent lows) which now brings in the start of August levels back into the picture. The 61.8% retracement level is located at 26646 which meets a key area of resistance dating back to April and May of this year.  On the downside, the 20-day and 50-day moving averages are targets in the 26600s. 

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