Stocks staged a robust rally on Friday, driven higher by news that President Donald Trump had reached agreement with China on terms for a “phase one” trade deal. The president said the deal covers intellectual-property issues, financial services and $40 billion to $50 billion in purchases of U.S. agricultural products.
Reports earlier in the day that the talks were going well gave a particular lift to semiconductor stocks, almost all of which have huge exposure to the Chinese market. The
rose 1.3% and the
PHLX Semiconductor Index
(ticker: APPL) shares rose 2.7% to $236.44, an all-time high.
President Trump’s vague but encouraging tweets earlier Friday helped fuel the rally. “Good things are happening at China Trade Talk Meeting,” he tweeted. “Warmer feelings than in the recent past, more like the Old Days. I will be meeting with the Vice Premier today. All would like to see something significant happen!”
While there weren’t initially many details on the tentative deal, what is clear is that the stock market is feeling heartened by a potential settlement with China, with positive implications for U.S. companies in general, and technology businesses in particular.
“This would be a major game changer and positive catalyst for tech stocks heading into year-end, as the China overhang remains an albatross around tech’s neck,” Wedbush analyst Dan Ives wrote in a research note Friday afternoon. In particular, he sees a boost for both semiconductor companies, because of substantial business in China, and for Apple, “the poster child” of the trade dispute.
If the tariffs now scheduled to be levied on Dec. 15 are instead shelved, he wrote, it “could unleash a risk-on scenario for the Street heading into year-end.” He estimates that the threat of additional tariffs would represent a 10% to 15% discount on overall tech shares.
“Inking a broader trade agreement around import imbalance and equally important, in our view, structural changes around forced technology transfer, IP protection, cyber intrusions/theft, services, and agriculture will be the focus of tech investors going forward,” he wrote. “Our near-term take continues to be [that] closer cooperation and negotiations around the growing IP theft issue is a potential positive for US tech vendors and a focus on curtailing the hundreds of billions of dollars lost annually by US companies around hacking espionage and nation state attacks is long overdue and a step in the right direction.”
Write to Eric J. Savitz at email@example.com