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Stocks close higher on China trade deal optimism, despite Trump impeachment bid

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U.S. stocks ended higher Wednesday, after falling for three days, after President Donald Trump said that a U.S.-China trade deal could happen sooner than expected, which offset concern about a congressional impeachment inquiry against Trump, along with weakening global economic data.

What are major indexes doing?

The Dow Jones Industrial Average DJIA, +0.61% gained 162.94 points, or 0.61%, at 26,970.7, while the S&P 500 index SPX, +0.62%  added 18.27 points, or 0.62%, at 2,984.87. The Nasdaq Composite Index COMP, +1.05%  rose 83.76 points, or 1.05%, at 8,077.38.

What’s driving the market?

President Trump said that a deal to end the protracted U.S. trade war with China could happen “sooner than you think,” while speaking with reporters Wednesday, adding that China wants “to make a deal very badly.”

That helped push House Speaker Nancy Pelosi’s formal launch Tuesday of an impeachment inquiry into Trump into the background, after reports that the president may have withheld congressionally approved military aid to Ukraine while pressing Ukraine’s president to investigate Democratic presidential candidate Joe Biden and his son.

While speaking at a joint news conference with the U.S. president on Wednesday, Ukrainian President Volodymyr Zelensky said that “nobody pushed me,” in reference to questions about pressure from Trump to investigate Biden and his son.

Wednesday morning the White House published a memorandum of a phone call between Trump and Zelensky in which Trump asks Zelensky to “look into” former vice president Biden and his son Hunter who had business dealings in Ukraine, but the 25 minute call did not mention military aid to the country.

Analysts said the impeachment inquiry is a potential worry for investors but the impact may be limited barring an indication that support for Trump is slipping in the Republican-controlled Senate. A vote by the House to impeach would be followed by a trial in the Senate, which would decide the president’s fate.

“In the near-term, people are looking at corporate earnings and the economy and feeling reasonably secure that the bottom isn’t falling out just yet,” said John Carey, Amundi Pioneer’s director of equity income, in an interview with MarketWatch.

“Definitely, there is some political risk in the market and from time-to-time that does worry people,” Carey said, but he added that any changes in power within the U.S. government, either from the impeachment inquiry or the coming 2020 election, still remain far off.

Still, the sudden rise in political risk in Washington comes as economic data deteriorates globally, adding a fresh complication for investors trying to decide whether central banks will be able to shore up growth.

“We would note that this is only a small step on the road to impeachment, which would ultimately require a 2/3 majority in the Republican-controlled Senate and that it is not clear yet whether the House will vote to endorse the inquiry, so leading to charges against Trump,” said Adam Cole, chief currency strategist at RBC Capital Markets, in a note.

Elsewhere on the trade front, China reportedly is buying more pork from the U.S, partly due to African swine fever which has afflicted the Chinese herd.

In other news Wednesday, U.S. August home sales rose 7.1% to a seasonally adjusted annual rate of 713,000, which was just shy of the 12-year high set in June, and were up 18% year-on-year.

Chicago Federal Reserve president Charles Evans said on Wednesday he backed the Fed’s two recent interest-rate cuts but feels the central bank is now “well-positioned” to see how economic data evolves. St. Louis Fed President James Bullard, in an interview on CNBC, said he thinks the central bank should keep slashing interest rates and that he prefers another quarter-point cut by year-end.

Which stocks are worth watching?

Philip Morris International Inc. PM, +5.20%  and Altria Group Inc. MO, -0.42% surprised the market early Wednesday with the news that they are ending their merger talks and will instead focus on launching a smokeless tobacco product in the U.S. Shares of Philip Morris were up 5.2%, those for Altria were off 0.42%.

Shares of Nike Inc. NKE, +4.16%  were up 4.16% as the apparel and footwear maker on Tuesday reported first-quarter earnings and sales that topped Wall Street expectations, including a jump in China.

Best Buy Co. Inc. BBY, -0.41%  on Wednesday unveiled financial targets, including $1 billion in additional cost reductions and annual enterprise revenue of $50 billion by 2025. Its shares were down 0.28%.

How are other markets performing?

U.S. Treasury yields climbed Wednesday as Trump suggested he could be close to striking a trade deal with China, contributing to stock market gains and weighing on demand for haven assets. Investors had been fleeing risky assets late Tuesday after the leader of the House said she would support an impeachment inquiry against Trump. U.S. The 10-year Treasury note yield TMUBMUSD10Y, -1.45% gained 9 basis points to 1.725%.

Gold prices posted their biggest daily loss in nearly three weeks Wednesday, pressured by strength in the dollar and a climb in U.S. benchmark stock indexes. Gold for DecemberGCZ19, +0.24%  on Comex dropped $27.90, or 1.8%, to $1,512.30 an ounce, after it finished at its highest on Tuesday for a most-active contract since Sept. 4, according to FactSet data. The ICE U.S. Dollar Index DXY, -0.09%  traded up by 0.7%.

Oil futures fell Wednesday as U.S. government data revealed a second weekly climb in domestic crude inventories. Also weighing on prices were news reports saying Saudi Arabia had restored most of crude production capacity, recovering from attacks on its facilities earlier this month. West Texas Intermediate crude for November delivery CLX19, +0.12% fell 80 cents, or 1.4%, to $56.49 a barrel, while November Brent crude BRNX19, -0.02%, the global benchmark, was off 71 cents, or 1.13%, at $62.39 a barrel.

In Asia, the China CSI 300 000300, -0.77%  fell 0.77% to 3,870.98, while Japan’s Nikkei 225 index NIK, +0.48%  closed down 0.36% at 22,020.

In Europe, the mood was more dour. The Stoxx Europe 600 Index SXXP, -0.58% fell 2.25 points to 387.59, its largest drop since Sept. 10 amid rising concern that growth is flagging. The British pound dropped sharply Wednesday as Parliament resumed, a day after a Supreme Court ruling that the prorogation was unlawful.