Wall Street rallies on trade war truce, $28 billion in mergers

(Reuters) – U.S. stocks rallied broadly on Monday after the United States and China put a potential trade war “on hold” to work on a wider agreement, with sentiment also getting a boost from the nearly $28 billion worth of U.S. merger deals.

U.S. Treasury Secretary Steven Mnuchin said on Sunday the United States and China had agreed to drop their tariff threats on billions of dollars worth of each country’s goods, while China on Monday praised a significant dialing back of tensions.

That sounded good to stock market investors, who have grown increasingly worried that an outright trade war would hurt the global economy and put an end to Wall Street’s multi-year bull run.

“I’m encouraged,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York. “People view this trade war “on hold” as a positive. They are going to want to be back in the market.”

“Technology, industrials, energy, financials, consumer discretionary are going to benefit today. You may include areas of the market that are involved in trade with China, I think that’s what’s going to help.”

Nine of the 11 major S&P sectors were higher, led by the technology sector’s .SPLRCT 1.21 percent gain. Apple (AAPL.O), which counts China as major growth market, rose 1.4 percent, giving the biggest boost to the S&P 500 and the Nasdaq.

The industrial sector .SPLRCI gained 1.20 percent, led by a 2.4 percent jump in Boeing (BA.N), which sells about a fourth of its commercial aircraft to Chinese customers. Caterpillar (CAT.N) gained 2.3 percent.

At 9:54 a.m. EDT the Dow Jones Industrial Average .DJI was up 277.12 points, or 1.12 percent, at 24,992.21, the S&P 500 .SPX was up 20.17 points, or 0.74 percent, at 2,733.14 and the Nasdaq Composite .IXIC was up 66.85 points, or 0.91 percent, at 7,421.19.

The biggest Dow gainer was General Electric (GE.N), which rose 2.1 percent after the company said it would merge its transportation business with rail equipment maker Wabtec (WAB.N) in an $11.1 billion deal. Wabtec jumped about 5 percent to a near three-year high.

Still, not all U.S. business leaders were happy to see the trade spat ratcheting down, with some saying it would be difficult for Washington to rebuild momentum to address what they see as troubling Chinese policies.

However, the United States delaying implementing tariffs on Chinese imports hit steel stocks. AK Steel (AKS.N) and U.S. Steel Corp (X.N) each fell more than 3 percent.

Chipmakers, whose major clients include Chinese companies, also posted broad gains, supported by Micron (MU.O) lifting current-quarter forecast.

Micron surged 4.4 percent, while Intel (INTC.O) gained 2.3 percent. All members of the Philadelphia chip index .SOX were higher, with the index gaining 1.81 percent.

Shares of regional bank MB Financial (MBFI.O) jumped 13.9 percent after Fifth Third Bancorp (FITB.O) said it would buy the smaller rival in a $4.7 billion deal. Shares of Fifth Third fell 7.1 percent, the most on the S&P.

The S&P index recorded 29 new 52-week highs and three new lows, while the Nasdaq recorded 109 new highs and 10 new lows.