Stocks rallied Thursday after President Donald Trump promised the United States was “very close to a big deal with China.”
“They want it, and so do we,” Trump said in a tweet.
This fueled hopes that the trade spat between the world’s two largest economies won’t escalate further, and the market turned positive after initially opening lower. The next round of US tariffs on Chinese imports is due to take effect on Sunday, December 15. American and Chinese negotiators are working to delay them, The Wall Street Journal reported earlier this week.
The Dow climbed more than 300 points at its best, before pulled back again slightly. The index was up 0.8%, or 238 points before midday. The S&P 500 climbed 0.9%, while the Nasdaq Composite was up 0.8%.
Trade headlines have had markets in a chokehold all year.
“The key point is that we’re in a world of binary outcomes,” Fabiana Fedeli, head of fundamental equities at Robeco, told CNN Business. “Will we have an escalation of the trade war, or not?”
If a deal finally comes together, it might not be perfect, Fedeli said, but it would remove uncertainty for investors and businesses. Companies that have delayed spending could again plan for the future, and orders would likely go up. All this would be a positive tailwind for earnings.
But there’s still reason to take Trump’s Thursday’s tweet with a grain of salt.
“If you ask me, compared to maybe two months ago, I’m a little more certain there will be some sort of deal,” Fedeli said. But in the age of tweeting politicians “the fundamentals can change with 140 characters.”
