U.S. Stocks Pull Back Off Early Highs But Close Mostly Positive

(RTTNews) - After moving sharply higher at the start of trading on Monday, stocks gave back some ground over the course of the session but managed to end the day firmly in positive territory. With the upward move on the day, the S&P 500 finished the session at a new record closing high.

The major averages all ended the day higher, although the tech-heavy Nasdaq outperformed its counterparts. While the Nasdaq surged up 84.92 points or 1.1 percent to 8,091.16, the Dow rose 117.47 points or 0.4 percent to 26,717.43 and the S&P 500 climbed 22.57 points or 0.8 percent to 2,964.33.

The initial strength on Wall Street came after President Donald Trump and Chinese President Xi Jinping agreed to restart stalled trade negotiations.

Trump met with Xi on the sidelines of the G20 summit in Osaka, Japan, over the weekend, telling reporters the meeting was "excellent, as good as it was going to be" and "we're right back on track."

In his closing G20 press conference, Trump revealed that he will not follow through on threats to raise tariffs on all remaining Chinese imports "at least for the time being."

The president also suggested that the U.S. would allow American companies to sell products to Chinese tech giant Huawei that do not pose national security concerns.

In return for holding off on tariffs and loosening restrictions on sales to Huawei, Trump said China has agreed to purchase large quantities of U.S. agricultural products.

Trump noted that existing tariffs on Chinese imports will remain in place, suggesting the U.S.-China trade dispute could still act as headwind to the global economy unless the conflict is eventually resolved.

"The quality of the transaction is far more important to me than speed," Trump said in a post on Twitter. "I am in no hurry, but things look very good!"

The early buying interest was partly offset by a report from the Institute for Supply Management showing a continued slowdown in the pace of growth in U.S. manufacturing activity in the month of June.

The ISM said its purchasing managers index edged down to 51.7 in June after slipping to 52.1 in May, although a reading above 50 still indicates growth in the manufacturing sector. Economists had expected the index to dip to 51.0.

With the continued decrease, the index dropped to its lowest level since hitting a matching reading in October of 2016.

"Comments from the panel reflect continued expanding business strength, but at soft levels; June was the third straight month with slowing PMI expansion," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

"Respondents expressed concern about U.S.-China trade turbulence, potential Mexico trade actions and the global economy," he added. "Overall, sentiment this month is evenly mixed."

Sector News

Semiconductor stocks gave back some ground after an initial spike but remained substantially higher throughout the session. The Philadelphia Semiconductor Index surged up by 2.7 percent to its best closing level in nearly two months.

Skyworks Solutions (SWKS) and Qorvo (QRVO) turned in two of the semiconductor sector's best performances on the news of Trump easing restrictions on the sale of products to Huawei.

Software, networking, and computer hardware stocks also saw significant strength on the day, contributing to the jump by the tech-heavy Nasdaq.

On the other hand, gold stocks moved sharply lower over the course of the session, dragging the NYSE Arca Gold Bugs Index down by 3.7 percent.

The sell-off by gold stocks came amid a steep drop by the price of the precious metal, with gold for August delivery plummeting $24.40 to $1,389.30 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Monday. Japan's Nikkei 225 Index surged up by 2.1 percent, while China's Shanghai Composite Index soared by 2.2 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index rose by 0.5 percent, the U.K.'s FTSE 100 Index and the German DAX Index both jumped by 1 percent.

In the bond market, treasuries recovered from an initial drop but pulled back once again as the day progressed. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.4 basis points to 2.034 percent.

Looking Ahead

Trading activity may be somewhat subdued on Tuesday, as a lack of major U.S. economic may keep some traders on the sidelines ahead of the holiday on Thursday.