Investors have generally favoured software and internet companies that are less dependent on international trade.
Technology stocks led another rise on Wall Street as positive news continued to emanate from the trade and economic fronts.
Canada’s foreign minister, Chrystia Freeland said issues related to motor vehicle manufacturing had been resolved and the trade talks with the US are expected to be wound up before President Donald Trump’s deadline on Friday.
This follows an earlier deal with Mexico in the Nafta renegotiation. That deal requires cars to contain a greater percentage of components that originate in North America and stipulates nearly half of the auto content must be produced by workers earning at least $US16 an hour.
The Commerce Department confirmed the strength of the US economy, lifting second-quarter GDP to an annual rate of 4.2% from an earlier estimate of 4.1%.
The department also reported corporate profits rose 16.1% from the second quarter a year earlier, the largest year-on-year gain in six years.
Lower taxes were a big part of the boost to the bottom line. Taxes paid by US companies fell 33% from a year earlier, or more than $US100 billion at an annual rate.
Per-share earnings for companies in the S&P 500 rose 24.8% over the second quarter of 2017, the second-fastest rate since late 2010 and trailing only this year’s first quarter,
Wall Street climbs
Stocks reacted by sending the two broad indexes to new closing highs. The S&P 500 added 0.6% to 2914.06 and the tech-heavy Nasdaq Composite climbed 1.0% to 8109.69.
The Dow Jones Industrial Average erased early losses and to finish up 60.89 points, or 0.2%, at 26,124.91.
Amazon.com and Google-parent Alphabet were among the S&P 500’s leaders after Morgan Stanley raised its price targets. Amazon rose 3% and Alphabet climbed 1.6%. Software firms also surged, with Red Hat rising 2.7% and Microsoft climbing 1.2%.
Investors have generally favoured software and internet companies that are less dependent on trade, particularly with China.
“These are the big growers in terms of sales,” USAA Asset Management head of equities John Toohey says. “That’s all still attractive to investors at a time when there’s relatively low growth economically world-wide,” he says.
Others are hoping agreements with Canada and the European Union will also lead to resolution of trade issues with China.
Worries that protectionist policies would weaken the global economy have hurt markets throughout the year. But some analysts view the most recent developments as a sign the Trump administration wants to avoid growth-hindering policies.
Commonwealth Financial Network chief investment officer Brad McMillan says the trade deals are proof that the Trump administration’s strategy can actually lead to deals and not just to more conflict.
“In other words, in the past two weeks, some of the major worries that have been holding the market back have eased significantly,” he says.
Bond yields fall
The yield on the benchmark 10-year US Treasury note edged down to 2.880% from 2.884% on Tuesday.
Oil prices reached a three-week high after a government report showed US stockpiles of crude fell for a second straight week and a measurement of fuel demand hit a record.
US crude for October delivery was 1.1% higher at $US69.27 a barrel while Brent crude, the global benchmark, rose 0.6% to $US76.72 a barrel.
Crude oil stockpiles fell by 2.6 million barrels in the week ended August 24, the Energy Information Administration said in its weekly report, while inventories of processed fuels such as gasoline and distillates also declined.
In trouble spot Turkey, the lira fell further after the central bank said it had doubled borrowing limits for overnight transactions. Ratings firm Moody’s downgraded nearly 20 Turkish financial institutions, citing an increased risk of deteriorating funding.
Global stock markets were mainly positive. The Stoxx Europe 600 added 0.3%. France’s CAC 40 also rose 0.3%, as did Germany’s DAX. The UK’s FTSE 100 eased 0.7%.
In Asia, Japan’s Nikkei closed 0.2% higher, while China’s Shanghai Composite Index fell 0.3% andHong Kong’s Hang Seng gained 0.2%.
