U.S. stocks rose on Friday as investors looked past a poor Intel earnings report, instead focusing on a partial government shutdown solution.
U.S. President Donald Trump announced that he reached a continuing resolution deal with Congress to reopen the government. The temporary deal will fund the government for three weeks until February 15.
The Dow Jones Industrial Average closed higher by 184 points, or 0.8 percent, to 24,737.20. The S&P 500 also rose nearly 1 percent, while the Nasdaq Composite moved higher as constituent Starbucks gained on strong earnings.
The Dow squeaked out a weekly gain of 0.1 percent for the week, its fifth straight positive week as investors continued to buy after the market’s big December drop. That five week win streak was the Dow’s longest since August.
“For the government to be open, for both sides to be talking – has got to be a positive for Wall Street. Everyone agreed there was measurable economic damage each week,” Tom Block, Washington policy strategist at Fundstrat Global Advisors, told CNBC.
Apple, Amazon Alphabet, and Facebook led the gains as investors got back into a risk-taking mood with the shutdown ending, buying their favorite technology names. Apple jumped 3.3 percent.
Additionally, two other themes added positive sentiment to Friday’s trading: Federal Reserve monetary policy and trade negotiations with China.
The Wall Street Journal reported that the Fed is closer than expected to ending its balance sheet unwind. The Fed’s decision is a key consideration for investors as they gauge the extent to which the central bank will tighten its monetary policy.
Treasury Secretary Steven Mnuchin projected confidence about the status trade negotiations between the U.S. and China in comments to Reuters. Mnuchin said both sides were “making a lot of progress” in the talks.
Major indexes pared their gains slightly after Trump made the official announcement the government would temporarily re-open, as some traders were disappointed that it wasn’t a more comprehensive agreement.
“We’ve become conditioned to the D.C. dysfunction. Traders will take profits and prepare themselves for additional stalemates,” Jeff Kilburg, CEO of KKM Financial, told CNBC.
Intel reported fourth quarter earnings which beat Wall Street expectations but missed on revenue. The company’s 2019 forecast showed revenue growth of just 1 percent, with Intel expecting to report first quarter earnings of 87 cents a share– 14 cents below Wall Street expectations.
Intel continues to search for a new CEO, seven months after Brian Krzanich was forced out. The stock was down more than 7 percent in trading, but other chip stocks were holding steady.
Starbucks stock gained as the company reported strong sales and earnings growth for its first quarter report. The coffee giant saw revenue climb 9 percent compared to the same period last year.
The government shutdown took on a new phase of seriousness Friday as the FAA halted some flights at New York’s LaGuardia airport on Friday because of a shortage of air traffic control workers. Traders are betting that increasing fallout from the shutdown may force Republicans and Democrats to at least come together for a short-term compromise.
The U.S. Senate, after rejecting two shutdown-ending bills, continues to search for a way to end a government closure entering its 35th day. The shutdown was threatening the economy, as hundreds of thousands of federal workers missed a second paycheck on Friday. Trump said federal workers would receive back pay in four or five days.
Investors are also continuing to monitor concerns surrounding a trade deal with China. Markets came under pressure Thursday after Commerce Secretary Wilbur Ross said that trade negotiations with China were far from complete. “We would like to make a deal but it has to be a deal that will work for both parties,” Ross told CNBC. “We’re miles and miles from getting a resolution.”
Mnuchin’s comments about progress in the trade talks came a few hours after Ross spoke. The Treasury secretary said he is looking forward to speaking with Chinese Vice Premier Liu He next week, when the representative visits the U.S.
Source: CNBC
