In This Article:
By Herbert Lash
NEW YORK (Reuters) - The dollar rose while key world and stock indexes on Wall Street scaled new records on Thursday as the U.S.-China trade deal, strong corporate earnings and encouraging U.S. economic data lifted equity markets.
Oil rose as the long-awaited Phase 1 trade deal brought some relief to markets, while gold prices slid briefly below the psychological level of $1,500 an ounce as the upbeat data signaled a healthy U.S. economy.
U.S. retail sales increased for a third straight month in December and the number of Americans filing claims for unemployment benefits dropped for a fifth straight week last week, indicating the labor market remained strong.
Other data showed a gauge of manufacturing activity in the U.S. Mid-Atlantic region rebounded in January to its highest in eight months, leading the Federal Reserve Bank of Philadelphia to call the factory outlook the brightest in more than 18 months.
Upbeat earnings from Morgan Stanley and a tech rally on Wall Street added to optimism from a trade deal investors hope will take the edge off a contentious 18-month U.S.-Sino dispute that has roiled markets and crimped global growth.
Stocks surged at the close on Wall Street to push the Nasdaq up slightly more than 1% and lead investors to wonder how much higher prices can go on valuations already at historic levels.
"It's a melt-up," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. "It makes everybody look stupid," he said, referring to the purchase of stocks at such high levels..
The market's price-to-earnings ratio of 18.4 times earnings for the S&P 500 is the highest since 2002, leading Bank of America research to say the market is running on fumes, as the benchmark index surpassed the bank's year-end forecast of 3,300.
Only a geopolitical event will curb an equity rally that has been largely fueled by the cutting of interest rates last year by the Federal Reserve and its expansionary monetary policy, Saluzzi said.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said the trade deal has underpinned a positive outlook for risk assets, especially emerging market stocks.
However, Haefele said investors must understand the deal's limitations. "We see the deal as representing a partial calming rather than an end to trade tensions," he said.
MSCI's gauge of stocks across the globe gained 0.55%, setting all-time and closing highs. Its index for emerging market stocks rose 0.23%.
U.S. stocks also climbed to new highs, as did Canadian shares on Bay Street in Toronto.