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Financial Markets 06/30 16:01
NEW YORK (AP) -- The U.S. stock market added to its record on Monday as Wall
Street closed out a second straight winning month.
The S&P 500 rose 0.5% in its first trading after completing a stunning
recovery from its springtime sell-off of roughly 20%. The Dow Jones Industrial
Average added 275 points, or 0.6%, and the Nasdaq composite gained 0.5%.
Stocks got a boost after Canada said it's rescinding a planned tax on U.S.
technology firms and resuming talks on trade with the United States. On Friday,
U.S. President Donald Trump had said he was suspending talks with Canada
because of his anger with the tax, which he called "a direct and blatant attack
on our country."
One of the main reasons U.S. stocks came back so quickly from their
springtime swoon has been hope that Trump will reach deals with other countries
to lower his stiff proposed tariffs. Otherwise, the fear is that trade wars
could stifle the economy and send inflation higher.
Many of Trump's announced tariffs are currently on pause, and they're
scheduled to kick back into effect in a little more than a week.
The U.S. stock market being back at a record high could actually raise the
risk of renewed escalations on tariffs, according to strategists at Deutsche
Bank led by Parag Thatte and Binky Chadha. They point to the pattern in 2018
and 2019 of rallies for the market prompting escalations for tariffs, which
then drove the market lower and led to subsequent pullbacks on tariffs, which
then sparked rallies again.
"Despite the rhetoric to the contrary, this dynamic looks alive and well,"
the strategists wrote in a report. "In our view, beyond the market reaction, if
negative impacts of tariffs on growth, earnings or inflation start to
materialize, we will get further relents."
On Wall Street, Oracle's 4% rise was one of the strongest forces lifting the
S&P 500. CEO Safra Catz said the tech giant "is off to a strong start" in its
fiscal year and that it signed multiple large cloud services agreements,
including one that could contribute over $30 billion in annual revenue two
fiscal years from now.
GMS' stock jumped 11.7% after the supplier of specialty building products
said it agreed to sell itself to a Home Depot subsidiary in a deal that would
pay $110.00 per share in cash. That would give it a total value of roughly $5.5
billion, including debt.
Less than two weeks ago, another company, QXO, said it was offering to buy
GMS for $95.20 per share in cash. After the announcement of the Home Depot bid,
QXO's stock rose 3.9%, and Home Depot's stock slipped 0.6%.
Hewlett Packard Enterprise rallied 11.1% and Juniper Networks climbed 8.4%
after saying they had reached an agreement with the U.S. Department of Justice
that could clear the way for their merger go through, subject to court
approval. HPE is trying to buy Juniper in a $14 billion deal.
Bank stocks were also solid after the Federal Reserve said on Friday that
they are financially strong enough to survive a downturn in the economy.
JPMorgan Chase climbed 1%, and Citigroup gained 0.9%.
All told, the S&P 500 rose 31.88 points to 6,204.95. The Dow Jones
Industrial Average added 275.50 to 44,094.77, and the Nasdaq composite gained
96.27 to 20,369.73.
In the bond market, Treasury yields fell ahead of several major economic
reports later in the week. The highlight will be Thursday's jobs report. It's
often the most anticipated economic data of each month, and it will come a day
earlier than usual because of Friday's Fourth of July holiday.
The job market has remained relatively steady recently, even in the face of
tariffs, but hiring has slowed. Economists expect Thursday's data to show
another step down in overall hiring, down to 115,000 jobs in June from 139,000
in May.
Such data has helped keep the Federal Reserve on hold this year when it
comes to interest rates. Fed Chair Jerome Powell has said repeatedly that it's
waiting for more data to show how tariffs will affect the economy and inflation
before resuming its cuts to interest rates. That's because lower rates can fan
inflation higher, along with giving the economy a boost.
Trump, meanwhile, has been pushing for more cuts to rates and for them to
happen soon. Two of his appointees to the Fed have said recently they could
consider cutting rates as soon as the Fed's next meeting in less than a month.
The yield on the 10-year Treasury fell to 4.23% from 4.29% late Friday.
In stock markets abroad, indexes dipped modestly in Europe following a more
mixed finish in Asia.
Stocks fell 0.9% in Hong Kong but rose 0.6% in Shanghai after China reported
its factory activity improved slightly in June after Beijing and Washington
agreed in May to postpone imposing higher tariffs on each others' exports,
though manufacturing remained in contraction.
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AP Business Writer Elaine Kurtenbach contributed.
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