Each of the three major U.S. stock indices hit fresh record intraday and closing highs Tuesday after China signaled trade negotiators were pacing toward a deal, and a batch of retail earnings came in mostly stronger than expected.
The Dow jumped more than 50 points as shares of component companies Disney (DIS) and Microsoft (MSFT) each also rose to record levels. Separately, the small-cap Russell 2000 (^RUT) also rose to a fresh all-time high on Tuesday.
Here’s where markets settled at the end of regular equity trading Tuesday:
China’s Ministry of Commerce said in a statement that Vice Premier Liu He, China’s top trade negotiator, spoke with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin Tuesday morning Beijing time.
“The two sides discussed how to resolve each other’s core concerns, reached consensus on how to resolve related issues, and agreed to maintain communication on the remaining issues in the first phase of agreement negotiations,” according to a translation of the statement.
Rhetoric from officials and media reports have vacillated between optimism and pessimism over prospects for a phase one trade deal, which President Donald Trump first touted in October. The two sides have just under three weeks before an additional tariff of 15% on about $156 billion worth of Chinese goods is set to take effect on December 15, which will likely spark retaliation from China.
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York City, U.S., November 21, 2019. REUTERS/Lucas Jackson
Despite the lingering uncertainty, stocks have continued to push to new highs and shrugged off recent trade concerns, with this week’s early rally led in large part by tech companies and other cyclicals. Both the S&P 500 and the tech-heavy Nasdaq pushed to record intraday highs Monday, and closed at new records Tuesday.
A steady drumbeat of messaging from Federal Reserve officials that interest rates would likely remain at their current, relatively low levels has also buoyed stocks.
Late Monday, Federal Reserve Chair Jerome Powell said during a speech in Rhode Island that the Fed’s three rate cuts this year have placed interest rates at a level “likely to remain appropriate.” The U.S. dollar hovered near unchanged and Treasury yields ticked lower across the curve Tuesday morning after his remarks.
“At this point in the long expansion, I see the glass as much more than half full,” Powell said. The current federal funds rate is in a band of between 1.50% to 1.75%.
On Tuesday, Dallas Fed President Robert Kaplan said during an interview on CNBC that “policy is in the right place now.” While Kaplan is not a voting member of this year’s Federal Open Market Committee, he participates in the central bank’s meetings and rate-setting deliberations.
STOCKS: Retail earnings bonanza
Abercrombie & Fitch (ANF) posted third-quarter results that fell short of consensus expectations, as weaker-than-expected comparable same-store sales at Hollister weighed on results.
Adjusted earnings per share of 23 cents were a penny short of expectations, and net sales of $863.5 million missed consensus estimates for $869.3 million, according to Bloomberg compiled data. Overall same-store sales, a closely watched metric for retailers, were flat over last year, versus a 0.1% gain expected.
At the flagship Abercrombie brand, same-store sales rose 3%, much better than the 0.1% gain expected. However, Hollister’s same-store sales dropped by 2%, versus no change expected. In the U.S., where Abercrombie derives about 65% of revenue, same-store sales slowed to just a 3% gain, versus 6% last year.
Best Buy (BBY) delivered stronger than expected third-quarter results and raised guidance for one of its key segments, presaging a potentially strong holiday shopping season for the electronics retailer.
Adjusted earnings were $1.13 per share in the third quarter on revenue of $9.76 billion, better than the $1.03 per share on sales of $9.7 billion expected. Comparable same-store sales grew 2% in the U.S., better than the 1.4% growth expected, led by a 12.5% jump in appliance comp sales.
Best Buy said it expects its full-year Enterprise comp sales will increase by 1-2%, versus previous guidance for as much as a 1.7% increase. In the third quarter, Enterprise sales were up an estimates-topping 1.7%.
“In the near term, we are excited about our holiday plans. Our teams have once again put together a best-in-class assortment, prepared an amazing set of deals and ensured we have great inventory availability,” Corie Barry, CEO of Best Buy, said in a statement. “Customers ordering online will get free next-day delivery on thousands of items all season long with no membership or minimum purchase required. They can also choose to pick up their products in a store within an hour of placing their order.”
Burlington Stores’ (BURL) delivered estimates-topping third-quarter earnings and raised guidance, in another sign of the resilience for off-price retailers.
Third-quarter adjusted earnings per share of $1.55 were 15 cents ahead of consensus, while revenue of $1.78 billion was just $10 million below expectations. Comparable same-store sales grew 2.7%, just ahead of the 2.6% gain expected. Burlington sees full-year adjusted earnings per share of between $7.28 to $7.33, raising this from the $7.14 to $7.22 range previously provided.
“Our disciplined inventory management continued through the third quarter, as our comparable store inventory decreased 4%, enabling us to continue to take advantage of the abundant values available in the marketplace,” CEO Michael O’Sullivan said in a statement.
Dick’s Sporting Goods (DKS) raised its full-year earnings outlook to well above the Street’s consensus estimate and delivered better than expected fiscal third-quarter results.
Third-quarter adjusted earnings were 52 cents a share on net sales of $1.96 billion, better than the 38 cents a share expected on net sales of $1.91 billion. Dicks’s said it expects to earn between $3.63 to $3.73 per share this year, better than its previous guidance for as much as $3.45 a share and consensus expectations for $3.40 a share. This marks the third time this year that Dick’s has raised guidance.
In the third quarter, Dick’s saw increases in average ticket and transactions and growth across each of its three main business areas of hardlines, apparel and footwear, CEO Edward Stack said in a statement.
ECONOMY: Trade deficit unexpectedly narrows as imports drop
The U.S. advance goods trade deficit narrowed in October to $66.5 billion, unexpectedly shrinking compared to the revised $70.5 billion deficit in September, the Commerce Department said Tuesday. Consensus economists had expected the trade deficit to widen to $71 billion, according to Bloomberg-compiled data.
The decline in the deficit to the lowest level in more than a year was driven by a precipitous decline in imports, underscoring softer shipments amid higher tariffs and trade tensions. Imports fell to $201.8 billion in October, $5 billion less than September’s level and the lowest level in two years, as industrial supplies, automotive vehicle and consumer goods imports slid. Goods exports also declined, edging down by $0.9 billion to $135.3 billion.
Home prices in 20 major U.S. cities rose more than expected in September over last year, according to the latest S&P CoreLogic Case-Shiller 20-City Composite Index. Over last year, the property value index increased 2.1%, more than consensus estimates for a 2.01% gain. Over last month, the price index increased 0.36%, versus 0.3% expected and an upwardly revised 0.15% the month prior. The 20-city composite index comprises housing markets including Los Angeles, Miami, New York, Chicago and Atlanta.
Consumer confidence unexpectedly dipped in November for a fourth consecutive month, the Conference Board said Tuesday, as consumers’ assessments of current business and labor conditions fell. The headline index clocked in at 125.5 for the month, below expectations for 127.0. October’s reading, however, was upwardly revised to 126.1 from 125.9 previously reported.
Despite the drop in optimism over current situations, “consumers’ short-term expectations improved modestly, and growth in early 2020 is likely to remain at around 2 percent,” Lynn Franco, senior director of economic indicators at the Conference Board, said in a statement. “Overall, confidence levels are still high and should support solid spending during this holiday.”
