Stocks bounced back after yesterday’s swoon after reports emerged that despite having differences the US and China were on track to complete a phase one trade deal on or before December 15th. Both sides of the equation appear to be working diligently to get a deal done which is good since China’s GDP growth rate is expected to come in below 6% and debt defaults at private companies are running at 4.5% according to Moody’s with expectations that this number will remain high. Two more large private firms in China defaulted on about half a billion in debt yesterday one being a “prestigious” university.
At the close the Dow finished at 27,646 up 146 on lighter trading volume. IBD and BTS indicators are still positive.
One emerging trend in the markets appears to be that investors are purchasing beaten down energy and material stocks. Institutional buying of steel, timber, copper and energy stocks has picked up over the past couple of months plus yesterday’s buyout of AK Steel, which was at first panned is now being talked of as a potential home run is adding to the intrigue. The deal might also keep alive the AK Steel Ashland Ohio plant which is old and was slated to be shut down. This could save a couple hundred jobs and produce pig iron that could be sold to other steel companies as a base material for higher end finished products produced in electric arc furnaces. Energy and material stocks are cheap compared to the market and if a trade deal is worked out it could be good for global growth and therefore energy and material companies. Stay tuned.