Stock Market Hits Another Record High, As Recession Fears Ease

Topline: The stock market reached yet another milestone on Monday as the Dow Jones Industrial Average hit its first new record high since July, with the index boosted by continued optimism around a U.S.-China trade deal, solid economic data and strong performances from heavyweight stocks like Apple.

• The Dow’s new benchmark comes on the heels of the S&P 500 and the Nasdaq Composite Index both hitting record highs last week—and again on Monday, after a flurry of good trade, economic and corporate earnings news.
• Much of the market’s optimism, unsurprisingly, comes from trade progress: China said last Friday that it had in principle reached a consensus with U.S. negotiators, and on Sunday U.S. commerce secretary Wilbur Ross said that American firms would “very shortly” be granted licenses to sell to Chinese tech giant Huawei.
• Recent economic data has also helped spark the market-wide rally: Jobs data for October came in better than expected (128,000 new jobs vs. 90,000 forecast) and consumer spending has remained strong.
• More good news: Corporate earnings have turned out better than forecast, too—out of over 350 companies that have reported so far, around 75% have beaten expectations, according to Refinitiv data.
• “The fear of recession has really dissipated,” says Nicholas Sargen, economic consultant at Fort Washington Investment Advisors. “The market is agreeing with the Fed: It’s now ok to take a pause and see where the economy is headed in the rest of the year.”
• Big-name stocks like Goldman Sachs, Boeing and Caterpillar all traded higher and contributed to the Dow’s gains on Monday, while Apple—which has set numerous new record highs in the last few weeks—has been the best-performing stock overall in the index since July, according to CNBC.

Crucial quote: “Markets are in a sweet spot here—decent earnings, high prospects for a lessening of trade tensions between the US and China, further unlikelihood of a no deal-Brexit, an easy Fed, and a slate of Democratic candidates unlikely to unseat the President in 2020,” says Jamie Cox, managing partner at Harris Financial Group.

Big number: As of Monday morning, the S&P 500 is up nearly 23% so far in 2019—putting it on pace for its best year since 2013, according to data from Bespoke Investment Group.

Key background: Last month, President Trump said the U.S. and China had agreed upon a substantial “phase one” trade deal that is expected to be finalized and signed by the end of November.

What to watch for: The ongoing effects from the trade war continue to take a toll on the U.S. manufacturing sector, however; new orders for American goods fell more than expected in September, and business spending has also been weaker than predicted.