Stocks open sharply higher amid hopes for U.S.-China trade talks
Stocks started the session sharply higher, with all major averages up over 1% after a spokesman for China's Ministry of Commerce said that the U.S. and Beijing have maintained "effective" communication on trade. The spokesman, however, noted that China "firmly" rejects an escalation of the tariff dispute. U.S. GDP for the second quarter was revised to 2% from 2.1%, while personal consumption expenditures were changed to 4.7% from 4.3% and business spending was revised to -1.1% from -0.8%.
ECONOMIC EVENTS: In the U.S., second quarter GDP was nudged to a 2.0% growth rate, versus the 2.1% clip from the Advance report, and 3.1% in Q1. Jobless claims rose 4,000 to 215,000 in the U.S. in the week ended August 24 after falling 10,000 to 211,000 previously. The U.S. advance indicators report revealed a small downside import surprise that left a narrowing in the July trade gap, alongside a big upside retail inventory surprise, a small gain for wholesale inventories. Meanwhile, U.S. pending home sales declined 2.5% to 105.6 in July, weaker than expected and largely unwinding the 2.8% climb to 108.3 in June.
In trade news, CNBC reported that Gao Feng, spokesman for China's Ministry of Commerce, said that the country "firmly" rejects an escalation of the trade war with the U.S. and is willing to negotiate and collaborate in order to reach an agreement. Feng said that Chinese and U.S. trade delegations have maintained "effective" communication, though he did not confirm U.S. President Donald Trump's claim on Monday that the Chinese team called the U.S. over the weekend with the desire of coming to an agreement soon.
TOP NEWS: Shares of Apple (AAPL) were over 1% higher near noon after Nomura Instinet analyst Jeffrey Kvaal maintained a Hold rating and $185 price target on the stock, saying he believes many investors are looking ahead to the 2020 5G iPhone launch. The analyst noted, however, that consensus fiscal Q1 iPhone estimates "may be optimistic" while the shape of the 5G cycle "remains uncertain." Kvaal added that his U.S. and China checks indicate new iPhone demand "remains hushed," and as a result he lowered his fiscal 2020 earnings per share estimate for Apple to $12.55 from $12.98, below the consensus of $12.69.
On the earnings front, Dollar General (DG) shares rose more than 9% after the discount retailer reported better-than-expected results for the second quarter, with comparable sales rising 4% year-over-year in Q2. The company also raised its outlook for fiscal 2019, with CEO Todd Vasos saying the strength of the quarterly results "further validates" the company's strategy going forward. Meanwhile, rival Dollar Tree (DLTR) was fractionally lower after reporting Q2 results, providing Q3 guidance, and boosting its FY19 guidance. Of note, Dollar Tree commented on recent tariffs on Chinese goods, saying it is implementing actions that may mitigate the recently announced tariff increases.
In M&A news, Canada's Tilray (TLRY) announced that it has agreed to acquire 420 Investments, an adult-use cannabis retail operator headquarter in Calgary, Alberta, for up to C$110 in stock. The transaction is expected to close by the end of 1Q20.
MAJOR MOVERS: Among the noteworthy gainers was PVH Corp. (PVH), which rose over 7% after it reported better-than-expected quarterly results and provided guidance for the third quarter. Also higher after reporting quarterly results were Guess (GES) and Burlington Stores (BURL), which gained a respective 27% and 17%.
Among the notable losers was Realogy (RLGY), which dropped more than 22% after announcing an end to its USAA military rewards program. Also lower were Ollie's Bargain Outlet (OLLI) and Williams-Sonoma (WSM), which fell 24% and 8%, respectively, after reporting quarterly results.
INDEXES: Near midday, the Dow was up 344.62, or 1.32%, to 26,380.72, the Nasdaq was up 116.48, or 1.48%, to 7,973.37, and the S&P 500 was up 36.33, or 1.26%, to 2,924.27.
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