Wall Street edges higher on last trading day of the decade

US stocks rallied in the final moments of the decade to close the day higher, after President Donald Trump indicated earlier that a formal phase one trade agreement with China would be signed in just over two weeks.

The S&P 500 index traded in negative territory for most of the session before surging in the last hour of trading to close 0.3 per cent higher. The technology-heavy Nasdaq Composite also ended the day 0.3 per cent higher.

Tuesday’s buying activity failed to nudge the S&P 500 above Friday’s record closing price. The basket of US blue-chips ends the year 28.9 per cent higher, its best run since 2013. Over the decade, the index has gained 190 per cent in a relatively steady rally that began in the wake of the financial crisis and was supported by low interest rates.

The gains on New Year's Eve came after Mr Trump tweeted that he "will be signing our very large and comprehensive Phase One Trade Deal with China on January 15th". He added: "The ceremony will take place at the White House. High level representatives of China will be present."

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Mr Trump said negotiations for a phase two agreement will begin "at a later date" in Beijing.

Chinese stocks also gained on Tuesday with the CSI 300 index closing 0.4 per cent higher. The index ended the year 34.4 per cent higher, its best run since 2014. Australian stocks gained 1.5 per cent to cap an 18 per cent rise this year, its best since 2009. Hong Kong's Hang Seng index dropped 0.5 per cent for an annual gain of 9.7 per cent

Markets in Japan and Europe were closed on Tuesday. Stocks in both regions closed weaker on their final trading day of the year on Monday.

The yield on the US 10-year Treasury bond was up 4 basis points to 1.917 per cent after a shortened trading session that ended at 2pm in New York. The US stock market maintained regular trading hours.

US stocks were further buttressed by signs of strength in the housing market. The Case-Shiller home index for October, released on Tuesday morning, rose 0.4 per cent over the prior month, outpacing analysts’ forecasts.

"Homebuyers have demonstrated more significant price sensitivity since the second half of 2018 for the first time this cycle," said Thomas Simons, senior money market economist for Jefferies. "Both demographics and the change in tax law continue to favour moderate-priced housing over high-end housing."

Oil prices fell, with Brent crude dropping 1 per cent to $66 per barrel. Gold, steel and aluminium ended the day higher. – Copyright The Financial Times Limited 2019