A broad-based rally pushed U.S. stocks higher on Monday, with the S&P 500 and the Nasdaq closing at record highs for the second consecutive session as investor sentiment was buoyed by a trade agreement reached between the United States and Mexico.
The benchmark S&P 500 and the Nasdaq indexes hit records, bond prices fell and copper prices rose as the United States and Mexico agreed to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to the new terms on auto trade and other issues to remain part of the three-nation pact. Agreement could ease concerns about an escalation in global trade tensions.
A senior U.S. trade official announced a deal with Mexico to replace NAFTA, adding that talks with Canada were expected to begin immediately in hopes of reaching a final agreement by Friday.
The Dow Jones Industrial Average rose 259.29 points, or 1.01 per cent, to 26,049.64, the S&P 500 gained 22.05 points, or 0.77 per cent, to 2,896.74 and the Nasdaq Composite added 71.92 points, or 0.91 per cent, to 8,017.90.
Technology stocks led the Nasdaq above the 8,000 mark for the first time and the sector provided the biggest boost to the S&P 500.
The Toronto Stock Exchange’s S&P/TSX rose 88.34 points, or 0.54 per cent, to 16,444.39, led higher by cannabis, consumer discretionary and metals stocks.
Disputes between the United States and its trading partners have been a drag on investor sentiment for much of the year despite solid economic fundamentals and two robust quarters of corporate earnings.
“It takes a long time for people to come out of the concerns related to those thousand-point down days and feel a little bit more comfortable,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York. “And the trade concerns and the tariffs, that played a part in it, that’s what held it back."
“People are feeling a little bit more positive,” Pavlik added.
The upbeat trade outlook was boosted further as European Union officials said Washington was pressuring the EU to speed up tariff talks.
An official with the American Automotive Policy Council said he was optimistic about the trade deal. Shares of Ford Motor Co were up 3.2 per cent while General Motors rose 4.8 per cent.
Trade-vulnerable industrials such as Boeing Co. and Caterpillar Inc were up 1.3 per cent and 2.8 per cent, respectively, leading the sector’s advance and pulling the Dow higher.
Mexico-focused iShares MSCI Mexico ETF was up 2.1 per cent.
Major currencies gained against the U.S. dollar, which has been a safe haven from months of trade tensions.
“The (NAFTA) talks add to the sense that while the U.S. is still bogged down in its trade conflict with China, it is perhaps more willing to compromise elsewhere such as with Mexico and the EU,” said Ulrich Leuchtmann, head of FX and emerging market research at Commerzbank in Frankfurt.
“It’s decreasing the risk of a global trade war.”
The S&P and Nasdaq indexes both hit record highs, continuing a run that followed Fed chief Jerome Powell’s speech at the Jackson Hole symposium on Friday. Powell affirmed that the U.S. central bank was sticking with its strategy of gradual rate hikes. The gains on Friday cemented the S&P’s longest-running bull market.
Tesla Inc stock dipped 1.1 per cent on news that Chief Executive Elon Musk was scrapping his scheme to take the electric automaker private.
Chipotle Mexican Grill was the biggest percentage loser in the S&P 500, down 4.8 per cent after Wedbush downgraded the burrito chain’s shares.
Luxury retailer Tiffany & Co. was down 1.3 per cent ahead of its second-quarter earnings report expected early Tuesday.
In Toronto, leading the index were Aurora Cannabis Inc., up 7.7 per cent, Aphria Inc., up 6.9 per cent, and Linamar Corp , higher by 6.6 per cent.
Utilities stocks were the only declining sector.
Lagging shares were Bombardier Inc, down 3 per cent, Maxar Technologies, down 2.7 per cent, and Canadian Utilities Ltd, lower by 1.9 per cent.
The most heavily traded shares by volume were Aurora Cannabis, Aphria and Canopy Growth.
The TSX’s energy group rose 1.59 points, or 0.79 per cent, while the financials sector climbed 1.06 points, or 0.34 per cent.
West Texas Intermediate crude futures rose 0.32 per cent, or 22 cents, to US$68.94 a barrel. Brent crude rose 0.66 per cent, or 5 cents, to US$76.32.
The Canadian dollar traded higher at 77.01 cents US compared with an average of 76.71 cents US on Friday.
With files from Reuters