U.S. Stocks Extend Recovery on Trade Optimism; IRS to Pay Tax Refunds During Government Shutdown

U.S. stocks extended their relief rally on Monday, as the United States and China began a new round of trade negotiations ahead of the March deadline. The White House announced that the Internal Revenue Service (IRS) will pay tax refunds even if the government shutdown extends into filing season, a move that could ease political pressure on lawmakers as they negotiate a new budget.

Relief Rally Continues

Markets overcame a rocky start to finish in positive territory, with all three major indexes booking gains. The S&P 500 Index advanced 0.7% to 2,549.69. It has now gained in seven of the past eight sessions.

Nine of 11 primary sectors tracked by the S&P 500 finished higher, led by consumer discretionary shares. The sector rose 2.4% on surging retail and automotive stocks.

A strong performance in technology drove the Nasdaq Composite Index to a gain of 1.3%, where it finished Monday’s session at 6,823.47.

The Dow Jones Industrial Average rose 98.19 points, or 0.4%, to finish at 23,531.35. The blue-chip index was down triple digits through the early part of Monday’s session. Read more: Dow Jones Pares Triple-Digit Drop as Government Shutdown Weighs.

U.S.-China Talks Begin

Investors entered Monday’s session with a sense of optimism knowing that the United States and China had kicked off a new round of trade talks. The negotiations, which began on Monday, were held at the Chinese Commerce Ministry. An American delegation led by trade representative Jeffrey Gerrish attended. No further details have been provided.

President Donald Trump and Chinese counterpart Xi Jinping committed to resolving their trade spat following a face-to-face meeting in Buenos Aires, Argentina on Dec. 1. The leaders agreed to a 90-day truce that would see an immediate de-escalation of a tariff war that began earlier in the year.

For over a year, U.S. lawmakers have proposed measures to hold China accountable to trade reforms that would open up mainland markets to American companies, cut down on government subsidies and respect U.S. intellectual property. Beijing appears willing to cooperate, though members of the Trump administration remain skeptical.

Government Shutdown Won’t Affect Tax Refunds

The White House announced Monday that tax refunds won’t be impacted by the government shutdown if it extends into filing season, a decision that would ease the burden on federal workers affected by the impasse and allow lawmakers to negotiate the best deal possible. The decision marks a significant departure for the Trump administration, which previously said that refunds couldn’t be paid while the government was in shutdown mode.

Talks between Trump staffers and Democrats broke down over the weekend over funding for a controversial border wall. President Trump is demanding more than $5 billion in appropriations to build a steel wall on the U.S.-Mexico border. Democrats, on the other hand, said they are willing to commit $1.5 billion to border security but won’t fund a wall.

“This shutdown could end tomorrow, and it could also go on for a long time. … It’s really dependent on the Democrats,” Trump said on Sunday, according to CNN.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi