Wall Street close: Benchmarks retract from fresh record highs

US benchmarks ended higher Wednesday, although well below their highest levels following the signing by President Trump of a phase-one deal between the US and China. The trade war has been dominating the markets for the best part of two years and has added to concerns over global economic growth prospects.  

However, while the deal includes some reduction in tariffs on Chinese imports, most tariffs will remain in place until the next phase of the deal is agreed and that is likely to weigh on sentiment for a good while longer. Subsequently, stocks quickly reverted to the pre-signing levels and the Dow closed up 91 points, or 0.3%, at 29,031, after hitting an intraday peak at 29,127. The S&P 500 index ended higher at 3,289, and the Nasdaq Composite Index finished 0.1% higher at 9,259.

The trade deal also includes China agreeing to buy $40 billion worth of US agricultural goods which is a large step up from the $24 billion supplied in 2017. "To achieve this figure," analysts at ANZ Bank explained, "the US would need to supply 80% of China’s soybean requirements which is a tall order given how competitive Brazilian soybeans are. More pork is also expected to be supplied from the US which could take the edge of the excessively high meat prices currently prevailing in China."

US data in focus

On Wednesday, the US released the Producer Price Index numbers that arrived December which following the Consumer Price Index disappointment,  was also weaker than expected due to softness in the service sector offsetting higher-priced goods. "December data came in at just 0.1% − below expectations of 0.2% − bringing the annual inflation rate for 2019 to 1.3%. Inflation remains well below the Fed target of 2% but San Francisco Fed Reserve President Mary Daly said the three rate cuts last year does put the economy on track to reach that target," the analysts at ANZ Bank explained.

DJIA levels