Reports Of U.S.-China Trade Talks Spark Afternoon Rally On Wall Street

(RTTNews) - After turning in a lackluster performance in morning trading on Tuesday, stocks showed a strong move to the upside over the course of the afternoon. The major averages climbed firmly into positive territory, moving back within striking distance of last week's record highs.

The major averages finished the session at or near their best levels of the day. The Dow climbed 177.29 points or 0.7 percent to 27,349.19, the Nasdaq rose 47.27 points or 0.6 percent to 8,251.40 and the S&P 500 advanced 20.44 points or 0.7 percent to 3,005.47.

The afternoon advance came on the heels of reports indicating U.S. officials will soon travel to China for face-to-face trade talks.

Citing people familiar with the plans, a report from Bloomberg said U.S. Trade Representative Robert Lighthizer and a small team of senior U.S. officials will travel to China next Monday.

A separate report from CNBC said U.S. officials will travel to China for discussions sometime between Friday and Thursday, August 1.

Lighthizer and Treasury Secretary Steven Mnuchin have spoken with their Chinese counterparts by phone, although this would be the first face-to-face meeting since talks broke down in May.

The significant market reaction to the reports comes even though the South China Morning Post had already reported that Lighthizer and Mnuchin were likely to fly to China next week.

The move suggests traders are always ready to react to news that feeds persistent optimism about the U.S. and China ultimately reaching a trade deal.

A positive reaction to the latest earnings news contributed to initial strength on Wall Street, with shares of Coca-Coca (KO), surging up by 6.1 percent.

The jump by Coca-Cola came after the beverage giant reported second quarter results that beat analyst estimates and raised its full-year revenue forecast.

Conglomerate United Technologies (UTX) also posted a notable gain after reporting better than expected second quarter results and boosting its full-year outlook.

Meanwhile, fellow Dow component Travelers (TRV) moved to the downside after the insurer reported second quarter earnings that missed expectations.

The early buying interest was partly offset by a report from the National Association of Realtors showing a sharp pullback in existing home sales in the month of June.

NAR said existing home sales tumbled by 1.7 percent to annual rate of 5.27 million in June after soaring by 2.9 percent to an upwardly revised rate of 5.36 million in May.

Economists had expected existing home sales to edge down by 0.2 percent to a rate of 5.33 million from the 5.34 million originally reported for the previous month.

"Home sales are running at a pace similar to 2015 levels - even with exceptionally low mortgage rates, a record number of jobs and a record high net worth in the country," said NAR chief economist Lawrence Yun.

The disappointing housing data reinforces expectations of a near-term interest rate by the Federal Reserve but may also raise concerns about a more severe economic downturn.

Sector News

Chemical stocks moved sharply higher over the course of the trading session, driving the S&P Chemical Sector Index up by 2.3 percent to its best closing level in ten months.

Celanese (CE) helped to lead the chemical sector higher, surging up by 4.4 percent after reporting better than expected second quarter earnings.

Significant strength also emerged among banking stocks, as reflected by the 1.6 percent gain posted by the KBW Bank Index.

Semiconductor, oil service, and brokerage stocks also saw considerable strength on the day, while notable weakness was visible among gold stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index jumped by 1 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

The major European markets also moved to the upside on the day. While the German DAX Index surged up by 1.6 percent, the French CAC 40 Index advanced by 0.9 percent and the U.K.'s FTSE 100 Index climbed by 0.6 percent.

In the bond market, treasuries came under pressure on the heels of the reports of U.S.-China trade talks. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 3.1 basis points to 2.074 percent.

Looking Ahead

On the earnings front, Snapchat parent Snap Inc. (SNAP), Chipotle Mexican Grill (CMG), and Visa (V) are among the companies releasing their quarterly results after the close of today's trading.

AT&T (T), Boeing (BA), Caterpillar (CAT), and UPS (UPS) are also among the companies due to report their results before the start of trading on Wednesday.

Traders are also likely to keep an eye on a report on new home sales, with home sales expected to rebound strongly in June after plummeting in May.