Yahoo Finance Stocks close mostly higher after new trade agreement reached
Stocks ended Monday’s session mostly higher after the U.S. clinched a successor to the North American Free Trade that maintained a three-way deal with Canada and Mexico.
The S&P 500 (^GSPC) ended trading Monday up 0.36%, or 10.61 points, after posting its best quarter since 2013 last week. The Dow (^DJI) climbed 0.73%, or 192.9 points, while the Nasdaq (^IXIC) fell 0.11%, or 9.05 points.
The new U.S.-Mexico-Canada Agreement (USMCA), reached late Sunday before a midnight deadline, gives U.S. farmers increased access to Canada’s dairy markets and addresses concerns of potential U.S. auto tariffs. Both had been points of contention for the two countries, causing them to come to a gridlock in past negotiations. The U.S. and Mexico announced last month that they had reached a new trade pact to replace NAFTA, which could have excluded Canada if they failed to come to an agreement with the U.S. prior to their Sunday deadline.
NEWS: NAFTA successor helps resolve one point of trade tension
The USMCA is set to be signed by leaders of the three countries before the end of November and will then be submitted to Congress. The new agreement is intended to last 16 years, with reviews every six years, and will cover more than $1 trillion in trade.
But the new agreement does not spell the end of tariffs. President Donald Trump, speaking in a press conference Monday, said existing steel and aluminum tariffs will be kept on Mexico and Canada “until such time as we can do something that would be different,” citing quotas as one such path to take to ensure “that our industry is protected.”
The new USMCA agreement “preserves the trilateral nature of NAFTA, which reduces uncertainty in the region. At least some pent-up investment may be deployed as a result,” Bank of America Merrill Lynch analysts wrote in a note Monday. The deal “also reduces risk premium,” supporting Canadian assets like the Canadian dollar and clearing the way for continued hikes in the country, they wrote.
“USMCA constitutes a win for U.S. President Donald Trump and reduces the risk of escalation of global trade wars, as it provides a path for other trade deals such as an eventual U.S.-China agreement,” the analysts wrote.
But not all analysts agree that the U.S.’s latest trade deal with its North American partners will serve as a blueprint for negotiations with China.
“I do believe that unfortunately the China story is a lot more complicated (than NAFTA talks),” Luis Costa, Citibank head of CEEMEA FX and rates strategy, said Monday on CNBC’s “Squawk Box Europe.”
Andrew Hunter, an economist with Capital Economics, echoed skepticism that a similar truce with China could be reached. He noted that “the U.S. runs a bigger trade deficit with China than it does with all other countries combined.”
“Furthermore, unlike the disputes with Canada, Mexico and the EU, Trump’s aggression towards China has broader support,” Hunter wrote in a note. “The upshot is that it is still hard to see how a further escalation of the trade conflict with China will be avoided.”
Speaking at the press conference Monday, Trump said, “We’ll see what happens with China,” with regard to trade, adding, “Frankly, it’s too early to talk.”
STOCKS: Tesla soars after Elon Musk settles with regulators, GE taps new CEO
Shares of Tesla (TSLA) surged Monday after Elon Musk reached a settlement with the SEC after regulators sued the CEO for fraud over claims he had made in August about bringing Tesla private. Musk will be removed as chairman of the board of directors for at least three years, but will be allowed to stay on as CEO, under terms of the agreement. Shares of Tesla closed Monday up 17.35% to $310.70 per share.
General Electric (GE) replaced Chairman and CEO John Flannery with H. Lawrence Culp, Jr., effective immediately, according to a company statement Monday. John Flannery had taken over as chairman and CEO just 14 months ago. In addition to announcing the executive reshuffling, the beleaguered company also lowered its guidance for earnings per share and cash flow in 2018 due to “weaker performance” in GE Power. GE said it will take a $23 billion goodwill impairment charge associated with its Power segment. The stock stock was up 7.09% to $12.09 per share at the close Monday.
Facebook (FB) may be hit with a $1.63 billion fine from European regulators after the company admitted last week that personal data from approximately 50 million accounts had been compromised by hackers. Ireland’s Data Protection Commission asked the social media company to submit more details of the incident, the Wall Street Journal first reported. Shares of Facebook fell about 3.5% Thursday after the company announced that it had discovered the breach. The stock fell 1.23% to $162.44 at the end of trading Monday.
Shares of media giant CBS (CBS) fell after the company said in a filing Friday that it received subpoenas from New York city and state officials. The subpoenas related to sexual misconduct allegations against former CEO Leslie Moonves and culture concerns throughout the workplace at CBS, the company wrote in the filing. The stock fell 2.96% to $55.75 per share at market close Monday.
ECONOMY: U.S. IHS Markit PMI data comes in strong for September
Markit U.S. Manufacturing PMI came in at 55.6 for September, up from 54.7 in August. The results were in-line with average analyst estimates, according to data compiled by Bloomberg. The index, which measures manufacturing and service sector health, is at a four-month high, but confidence and outlook is the lowest of the year, IHS Markit said in the statement announcing the results.
“Worries about trade wars and tariffs continued to dominate, pushing business confidence in the outlook down to its lowest for a year,” IHS Markit Chief Business Economist Chris Williamson said. “Tariffs, alongside higher oil prices, were meanwhile a key factor reportedly driving input costs higher. Almost two-thirds of all companies reporting higher input prices ascribed the increase to tariffs.”
U.S. manufacturing expanded at a slower pace in September, according to data released Monday from the Institute of Supply Management. The ISM manufacturing index registered 59.8 for the month of September, down 1.5 percentage points from August’s reading of 61.3 and falling short of average analyst estimates of 60, according to data compiled by Bloomberg. Readings of more than 50 signal expansion.
New orders fell to 61.8, down 3.3 percentage points from August’s reading of 65.1. The prices paid index fell to 66.9 from 72.1 the month prior, marking the biggest one-month decline since June 2017. The employment index rose to 58.8 from 58.5.
“The small decline in the headline ISM manufacturing index last month from a 14-year high in August still leaves it at an unusually high level and is difficult to square with the slowdown in global activity, the stronger dollar, and the uncertainty generated by the threat of tariffs,” Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note. “As those factors begin to weigh on the factory sector more heavily, we still expect manufacturing output growth to slow over the coming months.”
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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