Dow Poised For Record High on US-China Trade, Vaccine Optimism: Oil Gains as Laura Accelerates into 'Major Hurricane'

U.S.-China trade optimism, as well as hopes for a near-term coronavirus vaccine breakthrough, has Wall Street looking at a triple set of all-time highs Tuesday.

The Tuesday Market Minute

  • Global stocks rally on U.S.-China trade optimism, as well as hopes of an early coronavirus vaccine.
  • U.S. and China officials reaffirm their commitment to the phase one trade deal in a delayed phone call late Monday, putting to rest concerns that it would could fall apart over the second half of the year.
  • AstraZeneca begins testing its 'antibody cocktail' coronavirus vaccine, following reports its could be fast-tracked for U.S. use by the Trump administration.
  • Oil prices gains as Tropical Storm Laura keeps much of the Gulf-region's crude output offline as NHC warns of a 'Major Hurricane' in the coming days.
  • Exxon, Pfizer and Raythenon shares slump after S&P Dow Jones opts to remove them from the Dow Jones Industrial Average in favor of Salesforce, Amgen and Honeywell.
  • U.S. equity futures suggest a firmer open on Wall Street, including a possible all-time high for the Dow, ahead of earnings from Best Buy before the bell and Salesforce after the close of trading.

Wall Street futures extended gains Tuesday, pulling the Dow closer to a fresh all-time high, after the U.S. and China reaffirmed their commitment to the phase one trade deal and AstraZeneca moved forward with a coronavirus vaccine that could ultimately be fast-tracked by the Trump administration.

U.S. Treasury Secretary Steve Mnuchin, along with Trade Representative Robert Lighthizer, held a phone call with China's Vice Premier, Liu He, late Monday that "addressed steps that China has taken to effectuate structural changes" in the trade agreement signed earlier this year.

"Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement," the U.S. Trade Representative's office (USTR) said in a statement.

The detente puts to rest concerns that the agreement was in danger of collapse after President Donald Trump said he didn't want to deal with China in the wake of the coroanvirus pandemic, and a scheduled call between the two sides on August 15 passed without discussion.

Smoothing trade relations at a time when both of the world's two biggest economies are in need of a boost in order to solidify their respective second half recoveries added more fuel to global stock markets, as did news of an early phase of human testing for AstraZeneca Plc  (AZN) - Get Astrazeneca PLC Sponsored ADR Report experimental 'antibody cocktail' coronavirus vaccine, which the Financial Times has said could be fast-tracked for use in the U.S. if testing proves successful.

The optimism on both fronts looks set to lift Wall Street to fresh record highs, perhaps most noticeably for the Dow Jones Industrial Average, which hit a fresh closing high of 28,308.46. The average needs to add only 94 points to take out its all-time high from February of 28,402.93, and is priced for an opening bell gain of 160 points.

The Dow's new record high comes just days ahead of its biggest shake-up since 2013, which will see bellwether stocks ExxonMobil  (XOM) - Get Exxon Mobil Corporation Report, Pfizer  (PFE) - Get Pfizer Inc. Report and Raytheon  (RTX) - Get Raytheon Technologies Corp Report dropped from the benchmark on August 31 in favor of Salesforce.com  (CRM) - Get salesforce.com, inc. Report, Amgen  (AMGN) - Get Amgen Inc. Report and Honeywell  (HON) - Get Honeywell International Inc. (HON) Report.

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ExxonMobil shares, which has sat on the Dow for nearly 100 years, were marked 1% lower in pre-market trading at $41.85 each.

Futures contracts tied to the S&P 500, meanwhile, suggest a 15 point gain, and a fresh all-time high for the broadest benchmark of U.S. stocks, which has gained more than 60% since is March 23 trough amid a combination of Federal Reserve support, government stimulus and super-powered gains for big tech stocks.

European stocks were also trading higher in the early Tuesday session, boosted in part by both the U.S.-China trade confirmation as well as a modestly better-than-expected reading for German GDP, which contracted at an 11.3% pace over the second quarter but looks on pace to recovery firmly over the second half of the year.

The Stoxx 600 was marked 0.56% higher in early Frankfurt dealing, lead by a 0.72% gain for the DAX performance index in Germany, while Britain's FTSE 100 gained 0.22% in London.

The U.S. dollar index eased 0.11% to 93.181 against a basket of its global peers in overnight trading, while benchmark 10-year Treasury bond yields bumped higher, to 0.70%, amid t he broader market optimism.

Global oil prices bumped higher, with U.S. crude reversing earlier losses, as some 80% of Gulf-region output remains offline ahead as the NHC warns Tropical Storm Laura will be a 'major Hurricane' when it hits the area over the next 24 hours.

WTI contracts for October delivery, the new U.S. benchmark, traded 20 cents higher from their Monday close in New York and were changing hands at $42.82 per barrel in early European dealing while Brent contracts for October, the global benchmark, were seen 45 cents higher at $45.58 per barrel.

Overnight in Asia, news of the U.S.-China trade talks lifted regional stocks closer to fresh two-year highs, with the South Korean KOPSI leading the gains, pulling the MSCI ex-Japan benchmark 0.2% higher heading into the final hours of trading.

Japan's Nikkei 225, meanwhile, followed Wall Street's Monday rally with a 1.38% gain that pegged the benchmark at 22,296.77 points.