USA stocks hit records amid China trade pact optimism

US Stock Indexes Sit at Record Highs Ahead of Earnings Season

The US and China sign the first phase of a trade deal which includes roughly $200 billion in Chinese purchases of American goods and services over the next two years.

The Dow Jones Industrial Average rose 91.5 points to 29,031.17 while the S&P 500 climbed 6.21 points to 3,289.36 and the Nasdaq Composite Index gained 7.37 points to 9,258.70.

-China phase-one trade deal. The pact eases some sanctions against China.

The centrepiece of the truce is a pledge by China to purchase at least an additional $200 billion worth of USA farm products and other goods and services over two years, over a baseline of $186 billion in purchases in 2017.

Both nations will have to deal with some of the more contentious trade issues as they move ahead with negotiations. The punitive tariffs for Chinese goods are still around $ 360 billion.

"This was telegraphed well enough for the market to see through and look into the next phase and what that means", said Keith Buchanan, portfolio manager at Globalt Investments.

Stocks are opening slightly higher on Wall Street, led by gains in health care and technology companies. The industry relies on China for sales and supply chains and benefits from better trade relationships. Microsoft rose 0.8% and Advanced Micro Devices gained 0.9%.

Homebuilders rose 30.2% last week over the previous week. (NIO), Bank of America Corp.

Energy stocks also fell along with the price of crude oil.

In other USA corporate news, Target (-6.5%) is among the biggest early laggards after reporting December holiday sales that were below expectations. If the fourth quarter meets expectations, it should be around the same.

"We see the upcoming reporting season marking a turning point after a period of weak profit growth for USA companies, one that should push equities higher this year even though the potential for further multiple expansion is modest in our view", he said in a note.

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"We're expecting a reacceleration in the back end of the year, so any [company] guidance that brings any type of skepticism to that could threaten the recent rally we've had and the gains that we've accrued in the past few months", Buchanan said.

Futures on the S&P 500 Index added 0.2% as of 3:50 Tokyo. The Dow rose 90.55 points, or 0.3%, to 29,030.22.

The Russell 2000 index of smaller company stocks picked up 6.66 points, or 0.4%, to 1,682.40.

Markets in Europe closed mostly lower.

The yield on 10-year Treasuries was at 1.80%.

The yield on 10-year Treasuries dropped three basis points to 1.78%.

The trade agreement clears the way for investors to focus on upcoming quarterly earnings reports, including the outlooks companies provide in light of the deal.

Financial stocks declined as the latest round of big bank earnings largely disappointed.

The deal done, traders will likely shift their attention elsewhere for now.

In other corporate news, Target shares dropped more than 7% after the retailer announced disappointing holiday same-store sales.

Expectations for corporate profits were downbeat heading into the reporting period. The bank is particularly impacted by movements in interest rates since it sells a range of consumer banking services, and its balance sheet is more aligned with short-term bonds and other securities. Utilities and makers of household goods also rose.

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