December 12, 2019
U.S. markets skyrocketed to record highs on Thursday after President Donald Trump tweeted that the U.S. is “getting very close to a big deal with China,” hinting that tariffs that are set to go into effect on Sunday may be avoided.
The Dow Jones Industrial Average surged by 260 points or 0.93%. The S&P 500 Index gained 30.26 points or 0.96%, while the Nasdaq Composite rose by 83.31 points or 0.96%.
“Getting VERY close to a BIG DEAL with China. They want it, and so do we!” tweeted Trump early morning on Thursday.
A separate report from the Dow Jones indicated that U.S. trade negotiators are offerings to cancel new China tariffs and reduce existing levies on Chinese goods by up to 50% on USD 360 Billion worth of imports, according to MarketWatch.
“This is further indication of the motivation to strike a deal on both sides, and as we approach this Sunday deadline, specifically the offer not to raise tariffs,” show that the negotiating levers are working,” said Mike Loewengart, vice president of investment strategy at E-Trade Financial Corp.
Trump’s tweet follows a day after the Federal Reserve decided to hold interest rates steady at its December meeting, halting a series of rate cuts that lifted markets and countered recession fears amid the ongoing trade tensions.
Policymakers agreed to keep rates between 1.5% and 1.75%, saying that the policy decision was appropriate to help prolong the nation’s economic expansion.
Federal Reserve Chairman Jerome Powell believes that rates do not need to be raised any time soon. He says the Feds can hold rates steady because historically unemployment has been able to remain at very low levels for an extended period of time without having an effect on inflation.
However, the Feds decision could conflict with Trump, who has been pressuring the Feds to lower interest rates even further.
For the year, the Feds maintained its outlook for the U.S. economy, which it expects to grow at 2.2% and then slow down to 2% next year.
Powell acknowledged that reaching trade agreements with China as well as neighboring nations Mexico and Canada would “remove uncertainty and be a positive for our country.”
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