Following back-to-back volatile trading sessions on Wall Street to start the new week, the U.S. equity market, capitalizing on some optimism on the global trade front, opened the session yesterday strongly to the upside. In fact, as was the case on Tuesday, the Dow Jones Industrial Average quickly went out to a gain of better than 300 points. A sense that some progress was being made with China on trade was the principal catalyst for the early move higher. Encouragingly, and unlike the case on Tuesday, the move did not conclude quickly. In fact, for the most part, the Dow's morning advance stayed north of 300 points.

Among the early beneficiaries was trade-dependent Dow-component Caterpillar (CAT – Free Caterpillar Stock Report), which jumped some 3% in morning action. The major tech names also fared well, as did the banking stocks. As to the trade matters, the President noted that talks between our country and China were ongoing and confirmed that he would not raise tariffs on imports from that country until he was sure about a comprehensive trade agreement. That represented a departure from earlier and more aggressive trade talk and gave the equity market a more sustained boost.   

Also, unlike Tuesday, the moves were broad, with both the large-cap and the small-cap indexes participating in the strong up move. This impressive strength then continued through the morning, so that as the noon hour arrived in New York, the averages were at their respective highs to that point, with the Dow and the NASDAQ leading the march higher. As before, it was optimism on trade that ruled the day. The gains would then keep on coming, with the Dow surging to a mid-session advance of  458 points. The NASDAQ, meanwhile would soar by a session-best 165 points as the afternoon got under way.

However, after all indications had pointed to a stealth advance on the day, the profit takers entered the fray, with the key averages quickly losing about half their earlier gains. However, that buying respite would prove brief, and as we reached the final hour of trading, the market was back on course, with the Dow climbing back to a gain of nearly 300 points, after just moments before having lost all but about 200 points of its early climb. The market, it would seem, still has doubters, but also is starving for good news, and nay positive movement on trade is just the tonic needed.     

The stock market would then meander back and forth for the remainder of the session at comfortably higher levels, but would not challenge the morning's advance. In fact, even with some final backtracking as trading concluded, the Dow still would end higher by 157 points. Also, the S&P 500 Index would add 14 points and the NASDAQ would retain 66 of its peak triple-digit advance of some 165 points. Gains also were tabulated by the S&P Mid-Cap 400 and a majority of the stocks traded on the NYSE. What did not rise yesterday, though, were oil prices, which faltered late in the day after earlier advances. 

Yesterday's positive session, meantime, has not yielded much in the way of a carry over. That is because while the markets in Asia had an upward bias to them in the overnight hours, stocks in Europe are mostly lower so far this morning, as are oil prices and Treasury note yields. Finally, the U.S. futures, which were mixed, are now pointing upward, ahead of the open. 
 
- Harvey S. Katz, CFA  
 
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.