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Dow Futures Point to Fresh Record Highs as Bulls Ride U.S.-China Trade Pact

Wall Street looks set for more record highs Thursday as global investors react to details of a phase one trade agreement between the U.S. and China that eases tensions between the world's two biggest economies.

The Thursday Market Minute

  • Global stocks print fresh record highs as investors react to details of the phase one trade agreement between the U.S. and China.
  • President Trump says the deal restores "economic justice" as China commits to $200 billion in additional purchases of U.S. goods and Washington agrees to rollback some tariffs on China-made products.
  • Tariffs on $350 billion in goods remain in place, however, and questions over China's ability to buy the equivalent of 5% of its currency reserves in extra goods as the economy slows continue to linger.
  • TSMC posts stronger-than-expected December quarter earnings amid a 5G-lead resurgence in global chip and smartphone demand.
  • Global oil prices jump after EIA data data shows 2.5 million barrel decrease in U.S. crude stocks.
  • U.S. equity futures suggest more opening bell gains on Wall Street ahead of December retail sales data at 8:30 am Eastern time and earnings from Morgan Stanley and Charles Schwab before the start of trading.

Wall Street futures edged further into record high territory Thursday, while global stocks returned to all-time highs, as investors reacted to details of the  U.S.-China trade agreement and bullish signals for the tech sector following stronger-than-expected earnings from the world's biggest contract chipmaker.

The so-called phase one trade agreement, signed yesterday at the While House by President Donald Trump and China vice premier Liu He, commits Beijing to an extra $200 billion in purchases of American-made goods over the next two years in exchange for a rollback in some tariffs put in place by Washington over the past eighteen months.

China will also pledge to "enhance" intellectual property protections - a key U.S. demand -- and crack down on the practice of forced technology transfers for U.S. firms doing business in the world's second-largest economy.

Trump said the deal "rights the wrongs of the past" while delivering "economic justice" between the two countries

"Our efforts have yielded a transformative deal that will bring benefits to both countries,'' Trump said during a ceremony at the White House. He added: "Keeping these two giant and powerful nations together in harmony is so important for the world"  

Several questions over the framework of the deal, however, continue to trouble investors, particularly those related to China's commitment to agricultural purchases, which, combined with energy buys, would amount to an additional $95 billion over the next two years - just as the economy grows at its slowest pace in three decades.

Still, a thawing of trade tensions between Washington and Beijing, and a pledge from both sides to continue negotiating for a more comprehensive agreement that eliminates the $350 billion in tariffs that remain in place, was more than enough to entice bulls back into a market that continues to print all-time highs.

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U.S. stocks look set to repeat that trend Thursday, with futures contracts tied to the Dow Jones Industrial Average suggesting a 137 point opening bell gain and those linked to the S&P 500 indicating a 15.8 point advance for the broader benchmark, which closed at an all-time high of 3,289.29 points on Wednesday.

Futures contracts tied to the Nasdaq also point to another 47 point gain for the tech-focused index, which closed at a record 9,258.70 points last night after Taiwan Semiconductor  (TSMC) , the world's biggest contract chip manufacturer, posted stronger-than-expected December quarter earnings of $3.88 billion amid a resurgence in smartphone and semiconductor demand.

 December retail sales rose 0.3% from last year, the Commerce Department said Thursday, a figure that was largely in-line with Street forecasts, but the November tally was revised higher, to 0.3%, and December sales were up 0.5% when auto sales were stripped out, suggesting a robust consumer heading into 2020.

Tesla Inc.  (TSLA) - Get Tesla Inc Report shares were a notable early market mover,falling 4.1% from all-time highs Thursday after analysts at Morgan Stanley cut their rating on the clean-energy carmaker to 'underweight', citing concerns for the sustainability of the stock's recent surge.

European stocks opened higher in Frankfurt, but the Stoxx 600 was marked 0.13% lower by mi-day in Frankfurt the DAX performance index slipped 0.21%. Britain's FTSE 100, meanwhile, dipped 0.49% as the pound edged higher, to 1.3066 against the U.s. dollar.

Overnight in Asia, the region-wide MSCI ex-Japan index bumped 0.18% higher, while the Nikkei 225 in Tokyo closed little-changed at 23,933.13 points. Both moves, however, were firm enough to help lift the MSCI World Index to a fresh-all time high.

Away from equities, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.03% higher at 97.253 as benchmark 10-year U.S. Treasury bond yields fell below the 1.8% mark amid the slowest reading for factory gate inflation since 2015. 

Global oil prices were marginally higher in early European trading, bouncing from a six-week low, after the U.S. Energy Department said domestic crude stocks fell by 2.5 million barrels last week and investors extended bets on near-term China energy purchases following yesterday's phase one trade agreement. 

Brent crude futures contracts for March delivery, the global benchmark for pricing, were last see seen 13 cents higher from their Wednesday close in New York and trading at $64.13 per barrel, while WTI contracts for February, which are more tightly-linked to U.S gasoline prices, were marked 9 cents lower at $57.72 per barrel.