Stocks

The Dow Added 223 Points to Pass 28000 for the First Time

U.S. stocks rose despite negative news about industrial production and mixed figures on consumer spending.

U.S. stocks rose despite negative news about industrial production and mixed figures on consumer spending.

Breaking Good. The Dow Jones Industrial Average closed above 28000 for the first time as stocks made moderate gains on Friday. U.S. industrial production declined more than expected in October, but retail sales rebounded. Investors continued to wait for a resolution to the U.S.-China trade dispute, while ignoring the public impeachment hearings against President Donald Trump. In today’s After the Bell, we…

Record Territory

All three major U.S. stock indexes rose on Friday to end the week at record highs. The Dow gained 222.93 points, or 0.8%, to close at 28004.89, while the S&P 500 added 23.83 points, or 0.77%, to finish at 3120.46 and the Nasdaq Composite increased 61.81 points, or 0.73%, to close at 8540.83.

The Dow closed above 28000 level for the first time. It’s yet another sign that investors are regaining confidence both in the pending trade truce with China and in the U.S. economy, wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, on Friday. The stocks that comprise the Dow are more cyclical than those in the S&P 500, a broader index, noted Zaccarelli, and they are now beginning to join in the rally that started last month.

“In the absence of any major, negative news on trade, the market is poised to begin the Santa Claus rally early and should leave markets even higher by year end,” Zaccarelli said.

Investors largely remain optimistic that the U.S. and China will finally close the much-awaited “phase one” trade deal. Late Thursday, National Economic Council director Lawrence Kudlow said negotiators were down to the “short strokes” needed for an agreement. The pact reportedly would have Beijing purchase more U.S. agricultural goods and have Washington roll back tariffs on Chinese imports.

But there is one possible snag: the continuing protests in Hong Kong, which turned increasingly violent this week. Local officials said that the city was “slipping into the abyss of terrorism” and Chinese President Xi Jinping said on Thursday that it has become an urgent task to bring the violence to an end.

The U.S. Senate is preparing for a quick passage of the Hong Kong Human Rights and Democracy Act, a bill that supports pro-democracy protesters in Hong Kong by placing the city’s special trading status with the U.S. under annual review. It is unclear whether the House of Representatives would pass the deal, and whether Trump would sign it at a key moment in the trade negotiations. Trump has told Xi he would not criticize China over Hong Kong.

U.S. industrial production dropped 0.8% in October, the largest decline since May 2018. It was the third decline in output in the past four months and was steeper than Wall Street expected. The United Auto Workers’ strike at General Motors reduced auto production by 7.1%, a significant drag on the overall number. Even excluding autos, industrial production was down 0.5%.

American consumers continued to prop up the economy. Retail sales increased 0.3% in October, rebounding from September’s 0.3% decline. Most of the sales gains came from auto dealers, gas stations and online shopping, while other retailers posted softer results. On a year-over-year basis, retail sales were up 3.1%, down from a 4.1% increase in September.

Write to Evie Liu at evie.liu@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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