Dow Spikes 200 Points after U.S. Government Removes Huawei From Black List
The Dow and broader U.S. stock market rebounded on Tuesday after the Commerce Department announced it was temporarily relieving China’s Huawei telecommunications group of trade restrictions, raising optimism that both countries still had time to iron out their differences and avoid a bigger tariff war.
Dow Bounces Back; S&P 500, Nasdaq Follow
All of Wall Street’s major benchmarks reported gains on Tuesday, partially offsetting back-to-back declines. The Dow Jones Industrial Average rose 197.43 points, or 0.8%, to 25,877.33.
The broad S&P 500 Index of large-cap stocks advanced 0.9% to settle at 2,864.36. Ten of 11 primary sectors contributed to the rally, led by materials stocks. Shares of information technology, industrials and energy companies rose by at least 1%.
Surging tech shares lifted the Nasdaq Composite Index to a gain of 1.1% where it closed at 7,785.72. The tech-driven average plunged 1.5% on Monday.
U.S. Eases Trade Restrictions on Huawei
The U.S. Department of Commerce announced Tuesday it was easing some trade restrictions against Huawei that will allow existing business relationships to go on uninterrupted for the next 90 days. Basically, the U.S. government is granting a 90-day license for smartphone companies and internet providers to continue working with the Chinese telecommunications giant to ensure existing networks are maintained.
Last week, U.S. Commerce Secretary Wilbur Ross announced that Huawei and 70 affiliates were being added to the so-called Entity List, which effectively bars them from doing business with American companies. The Entity List is reserved for individuals, companies and nations that are said to pose a national threat.
The announcement forced Google on Sunday to cut ties with the Chinese smartphone company. Google reversed that decision on Tuesday after the government confirmed it was extending a 90-day license to Huawei’s business partners.
A Google spokesperson issued the following statement in an email correspondence with CNBC:
“Keeping phones up to date and secure is in everyone’s best interests and this temporary license allows us to continue to provide software updates and security patches to existing models for the next 90 days.”
U.S. Housing Market Gets No Help from Falling Mortgage Rates
A sharp decline in mortgage rates over the past six months have not helped the U.S. housing market regain its footing. On Tuesday, the National Association of Realtors (NAR) said existing home sales declined 0.4% in April to a seasonally adjusted annual rate of 5.19 million, defying expectations for an increase.
Although NAR said it was not overly concerned about the modest dip in housing sales, real estate remains one of the softest segments of the U.S. economy. Millennials are also finding it difficult to enter the market for the first time due to excessive student debt levels.
“Given the record high job openings in the construction sector, some may want to take a gap year to work there and save, and thereby lessen the student debt burden,” NAR chief economist Lawrence Yun said of millennial buyers.
Featured image courtesy of Shutterstock. Chart via Stockcharts.com.