Stocks close little changed to end winning week as US and China strike an initial trade deal

Stocks were little changed on Friday after China and the U.S. agreed to a phase one trade deal as investors concluded a solid week of gains.

The trade deal will include a rollback of some of the China tariffs and halts additional levies set to take effect on Sunday. China agreed to significant purchases of U.S. agricultural products, but the amount is below what the White House was reportedly pushing to get. On the U.S. side, investors were hoping for more than just a partial rollback of some tariffs.

“What might be coming out of the market could be hopes for a little bit of a wider scope as it relates to the deal,” said Jeff Mills, chief investment officer at Bryn Mawr Trust. “Maybe some of that started to get priced in yesterday. But overall, the market is still viewing it as a positive and it probably should.”

The Dow Jones Industrial Average ended the day just 3.33 points higher at 28,135.38. The S&P 500 closed just above the flatline at 3,168.80 while the Nasdaq Composite gained 0.2% to 8,734.88. Earlier in the day, the major averages hit record highs.

Apple led Friday’s slight gains, rising 1.4% to a record after news of the trade agreement was announced. Some of the tariffs set to take effect Sunday would have impacted some of Apple’s key products, including the iPhone.

Wall Street posted solid weekly gains in anticipation of the trade deal. The S&P 500 and Nasdaq were up 0.7% and 0.9%, respectively while the Dow gained 0.4% this week.

U.S. Trade Representative Robert Lighthizer said China will buy $40 billion in U.S. agricultural goods. That’s below the $50 billion Trump was reportedly looking for. He also said both sides are aiming to sign the agreement in January.

In a series of tweets, President Donald Trump said: “We have agreed to a very large Phase One Deal with China. They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more.”

Trump also said some of the prior duties on $120 billion worth of Chinese imports will be rolled back to 7.5% from 15%. He also noted the White House will keep a 25% levy on $250 billion in goods in place.

“The word that came to my mind was ‘squishy,'” said Mike Bailey, director of research at FBB Capital Partners, when describing the trade deal. “But I do wonder if this is a bit of buying the rumor and selling the news. We had been anticipating some kind of thawing in U.S.-China trade relations since October.”

The Dow jumped more than 200 points while the S&P 500 closed 0.9% higher on Thursday as traders anticipated the Friday agreement. The Nasdaq Composite ended the day up 0.7%. The major averages also rose on Wednesday.

To be sure, the U.S.-China trade drama will continue throughout 2020, said Komal Sri-Kumar, president of Sri-Kumar Global Strategies.

“There is not going to be a comprehensive trade deal before the 2020 election,” Kumar said. “What has happened so far is a face-saving way for the U.S. to show some progress on the trade talks.”

China and the U.S. have been fighting a trade war for nearly two years as the Trump administration tries to level what it sees as an uneven playing field. The trade war has dented business sentiment and has sparked volatile moves in capital markets.

Stocks have been on a massive tear this year despite the lingering trade fears. Through Friday’s close, the S&P 500 is up 26.4% for 2019. The Dow and Nasdaq are up 20.6% and 31.6%, respectively, this year.

Stocks also moved after exit polls showed the U.K.’s Conservative party winning a big majority in Parliament, giving Prime Minister Boris Johnson a clear path to move forward with his Brexit plans.

The British pound surged more than 1% against the U.S. dollar and hit its highest level since the summer of 2018.

–CNBC’s Sam Meredith contributed to this report.

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