U.S. stocks continued their recent gains on Monday, with the Dow Jones Industrial Average reaching its longest daily gain in 13 months after the U.S. cancelled its plans to impose tariffs on Mexican goods and several multibillion-dollar mergers and acquisitions boosted the market.
Mexico agreed on Friday to take more measures to prevent illegal immigrants from flooding into the United States after Washington threatened to impose a 5% import tariff on all Mexican goods from Monday.
In several major mergers and acquisitions, United Technologies (UTX.N) agreed to merge its aviation business with defense contractor Raytheon (RTN.N) to create a new company worth about $121 billion.
Strategists said Mexico's trade news encouraged investors, leaving the S&P 500 about 2% behind its all-time high in early May, but they pointed out that today's closing level was far below its intraday high and feared that investors might trade more on hope than on reality.
"This is an unexpected increase triggered by the United States not imposing tariffs on Mexico," said Paul Nolte, portfolio manager at Kingsview Asset Management.
But he added that the U.S. -China trade war was still fermenting, and investors'expectations that the Federal Reserve would respond by cutting interest rates might be too optimistic.
"I hope the Fed will not stand by and do nothing next week," Nolte said.
The stock market rose in part because of optimism that the Federal Reserve would adopt a more relaxed policy to ease the impact of escalating trade tensions.
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