Thursday's Stock Market Open: US Equities Higher As Iran Tensions Subside, China Trade Deal Looms

U.S. stocks traded higher Thursday on traders’ perception tensions with Iran were easing and on optimism over a trade deal with China.

The Dow Jones Industrial Average rose 234.61 points to 28,979.70 while the S&P 500 gained 20.76 points to 3,273.81 and the Nasdaq Composite Index climbed 78.86 points to 9,208.10.

Traders appeared to be relieved that recent turmoil between the U.S. and Iran subsided after President Donald Trump said Wednesday that Tehran is “standing down” after it fired missiles at military bases housing U.S. troops in Iraq in retaliation for the killing of Iranian commander Qassem Soleimani.

Trump also said the U.S. might be open to negotiate with Iran.

However, some analysts warned Iran may continue to pose a threat to the U.S.

“Iran is not finished with its retaliation – this [attack on bases in Iraq] is kind of the first strike, or token of symbolic response,” said Heather Williams, senior policy researcher at Rand Corp.

China’s Commerce Ministry said on Thursday that Vice Premier Liu He, head of Beijing’s trade negotiating team, will sign a phase one trade deal in Washington next week.

“We do not want to be dismissive of the political ramification of recent events [in Middle East], but we doubt that they will have a long-lasting effect on the trajectory of markets unless matters develop well beyond where they stand today,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management,.

The World Bank estimated the global economy will expand 2.5% in 2020, up slightly from 2.4% growth last year, but a significant drop from growth rates in excess of 3% in 2017 and 2018.

“Downside risks persist. The recovery is fragile,” said World Bank Vice President Ceyla Pazarbasioglu. “Uncertainty has weighed on confidence, trade and investment which are all critical for growth.”’

Initial jobless claims dropped by 9,000 to a seasonally adjusted 214,000 for the week ended Jan. 4 – the fourth consecutive weekly decline, the Labor Department said on Thursday.

Federal Reserve Vice Chairman Richard Clarida said Thursday morning that the central bank is in “a good place” with its monetary policy but remains flexible.

“The shift in the stance of monetary policy that we undertook in 2019 was, I believe, well-timed and has been providing support to the economy and helping to keep the U.S. outlook on track,” he said. “I believe that monetary policy is in a good place and should continue to support sustained growth, a strong labor market, and inflation running close to our symmetric 2% objective.”

Bank of England chief Mark Carney said the central bank is debating making the equivalent of 250 basis points in rate cuts, if necessary, through traditional cuts as well as quantitative easing.

Advanced Micro Devices (AMD) gained 3.8 % after Mizuho Securities upgraded shares to buy from neutral, citing stronger server market in 2020. Kohl’s (KSS) shares plunged 9.1% after issuing earnings guidance on the lower end of its forecast for fiscal 2019.

Bed Bath & Beyond (BBBY) plummeted 19.4% after it said it will delay the closure of 20 stores until fiscal 2020.

Overnight in Asia, markets closed broadly higher. China’s Shanghai Composite rose 0.91% while Hong Kong’s Hang Seng gained 1.68% and Japan’s Nikkei-225 jumped 2.31%.

In Europe markets closed higher, as Britain’s FTSE-100 rose 0.31%, France’s CAC-40 climbed 0.19% and Germany’s DAX gained 1.31%.

Crude oil futures fell 0.5% at $59.31 per barrel and Brent crude dropped 0.35% at $65.21. Gold futures slipped 0.63%.

The euro edged up 0.01% at $1.1107 while the pound sterling slipped 0.24% at $1.3064.