U.S. stock-index futures pointed to a sharply higher open on Tuesday, comments by Chinese President Xi Jinping suggested a less-aggressive stance with respect to trade, which helped to ease concerns about an escalating conflict between the country and the U.S.
Trade has by far been the biggest driver of equity movements of late, with major indexes seeing near-daily swings in both directions on every headline that points to either growing or cooling tensions between the two countries, who are major trading partners. The market’s updraft came after late-session jitters linked to reports that the Federal Bureau of Investigation raided the office of President Donald Trump’s personal lawyer helped to erase much of Monday’s rally.
What did the main benchmarks do?
Dow Jones Industrial Average futures YMM8, +1.25% surged 304 points, or 1.3%, to 24,311, while S&P 500 futures ESM8, +1.10% gained 31.15 points, or 1.2%, to 2,650.25. Nasdaq-100 futures NQM8, +1.39% jumped 98.25 points, or 1.5%, to 6,595.50.
U.S. stocks closed higher on Monday, but they ended well off their highs of the session, with the rally deflating on the news of the FBI raid. The S&P 500, by one metric, suffered its worst final hour of trading in more than six years.
The Dow industrials DJIA, +0.19% which had surged by as much as 440 points during the session, closed up 46.34 points, or 0.2%, at 23,979.10 on Monday. The S&P 500 SPX, +0.33% fell back from a gain of 1.9% to close just 0.3% higher. The Nasdaq Composite Index COMP, +0.51% gained 2.3% at one point, but finished up only 0.5%.
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What’s driving markets
A global equity rally was triggered as Chinese President Xi told the Boao Forum that Beijing plans to give foreign companies greater access to financial and manufacturing sectors. He also talked about a cut in tariffs on car imports and an improvement in protection of intellectual property, among other measures. While many of the measures had been previously touted by Xi, investors cheered the lack of any escalation in rhetoric.
“In a world aspiring for peace and development, the Cold War and zero-sum mentality look even more out of place,” said Xi.
Trump has threatened tariffs on up to $150 billion of Chinese products, which Beijing has answered with proposed levies of its own.
Trade optimism could, for now, help the market shake off the FBI’s seizure of records held by Michael Cohen, a personal lawyer for Trump. The records are related to a $130,00 payment to adult-film actress Stormy Daniels, who alleges she had a brief affair with the president. Trump dismissed the raid as a “witch hunt.”
Read: Here’s what FBI raid on Trump lawyer’s office means for the stock market
Elsewhere, the U.S. is preparing for a possible military strike against Syrian President Bashar al-Assad over a suspected chemical-weapons attack that killed civilians. “It will be met, and it will be met forcefully—when, I will not say,” Trump said Monday evening, ahead of a meeting with senior military leaders.
What are strategists saying?
“It was a short-term surprise to the risk markets that Xi put out a positive comment saying he’s open to trade negotiations and relaxing trade restrictions. That bodes well for the short run, but these types of negotiations sometimes start with open arms and then end with massive amounts of debate and finger pointing. This is going to be an ongoing issue for months, but for today it’s a shot of adrenaline,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors.
Speaking about the FBI raid, Morganlander said investors “shouldn’t focus entirely on it, as earnings and growth trends will be more important, but these kinds of issues continue to be a cloud of uncertainty that need to be monitored.”
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What data are in focus?
Ahead of the open, the National Federation of Independent Businesses index of small-business optimism fell to 104.7 in March.
U.S. wholesale prices accelerated in March, showing a 0.3% increase despite lower energy costs, suggesting inflationary pressures in the U.S. have become more widespread. Economists surveyed by MarketWatch had predicted a 0.1% increase in the producer-price index.
Read: The economy is fine now, but watch out for 2020, top economist says
Federal Reserve Bank of Dallas President Robert Kaplan said he expects the Fed to increase rates twice more this year, but added that the pace of rate increases could ease in the years ahead due to slowing growth. He made the comments in a Bloomberg TV interview in Beijing late Monday.
Which stocks could be active?
Facebook Inc. FB, +0.46% shares rose around 1% in premarket. Mark Zuckerberg, chief executive officer of the social-media website, is due to testify in a joint hearing held by two Senate committees on Tuesday around 2:15 p.m. Eastern. Zuckerberg is expected to discuss his company’ handling of a privacy controversy involving Cambridge Analytica.
Shares of VeriFone Systems Inc. PAY, -1.12% surged 52% in premarket after the payment and business services provider said it has agreed to a $3.4 billion private-equity acquisition by a group led by Francisco Partners. The deal is worth $23.04 a share in cash, a premium of 54% on Verifone’s closing price Monday of $15.
Tenneco Inc. TEN, -0.05% said it planned on buying Federal-Mogul, a manufacturer of parts for cars and the aerospace industry, from Icahn Enterprises L.P. IEP, -0.60% in a deal valued at $5.4 billion. Shares of Tenneco rose 2.8% in premarket trade, while those for Icahn Enterprises were halted.
Energous Corp. WATT, +5.25% rallied 27% in premarket after the developer of wire-free charging technology said the Federal Communications Commission has approved its near-field transmitter WattUp.
Tupperware Brands Corp. TUP, -0.38% fell nearly 5% after the plastic-container maker lowered its first-quarter earnings guidance.
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First-quarter earnings season will kick off in earnest on Thursday and Friday, as BlackRock Inc. BLK, +0.23% Wells Fargo & Co. WFC, +0.04% and JPMorgan Chase & Co. JPM, +1.20% are all expected to report results.
What are other markets doing?
Asian stocks got a lift after the Chinese president’s speech, with Hong Kong’s Hang Seng Index HSI, +1.65% HSI, +1.65% rising 1.5%. European stocks SXXP, +0.61% hit multiweek highs as a global equity rally took hold.
Gold futures GCM8, +0.14% were steady at $1,341.50 an ounce. The ICE U.S. Dollar Index DXY, -0.18% flattened out at 89.794. Oil prices CLK8, +1.81% surged 2.1% to $64.77 a barrel, climbing as trade-war tensions lifted.