Semi stocks jump on partial trade deal with China

US China on chess board
President Trump said a phase one trade deal has been reached with China, although many details aren't yet clear, and terms have yet to be drafted and signed. The relationship with China is now "a love fest," he added. (iStockPhoto)

Semiconductor stocks surged Friday on news of a tentative and partial trade deal with China that President Trump called a “very substantial phase one deal” which still must be inked and signed.

Micron’s stock saw one of the biggest increases by 4.2%, while Qualcomm climbed 2.3% and Apple rose by 2.66%, reaching an all-time high of $236.21. The Nasdaq Composite of major tech stocks rose by 1.3%.**

President Trump and members of his administration said the phase one deal includes some intellectual property protections for U.S. technology companies, but he didn’t elaborate, adding that some additional IP discussions will happen in a second phase. Questions about Huawei’s status on the U.S. Entity List and whether U.S. companies can get permits to sell technology to Huawei will be handled separately, officials said.

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Also in phase one is an agreement that U.S. tariffs on Chinese goods won’t increase from 25% to 30% on Tuesday as earlier planned. No decision has been made on a 10% tariff taking effect on Dec. 15 that affects Chinese imports of cell phones, laptops, video consoles, monitors and some toys and apparel and footwear.

The president was most proud of an agreement in principle in phase one that China has agreed to buy up to $40 billion to $50 billion in agricultural products, up from a high of about $16 billion.  Farmers “will have to buy more land and bigger tractors” to produce all the soybeans and other ag products to meet the demand, he said. Administration officials also said phase one gives more transparency on currency trading and issues of forcible transfer of technology in China, but no details were provided.

Once the phase one details are put into writing, they will be signed by President Trump and China President Xi, possibly in about five weeks when they meet for a conference in Chile. At that point, phase two will begin and there is also the possibility of a third phase. President Trump said it is such a big deal that it is appropriate to divide it into phases.

“We realized [a deal] was very important, not only for the U.S. and China but for the world,” President Trump said, adding it is good for “world peace.” He said the relationship with China “in certain ways is better than it’s ever been…This isn’t just a deal on trade…now it’s a love fest.”

Chinese negotiators at the meeting in Washington also praised the progress. Chinese Vice Premier Liu He hand delivered a letter to Trump from President Xi that commended the spirit of cooperation between the two countries.

Some analysts were concerned the phase one agreement could still fall apart, as did negotiations in May. The trade war with China has gone on nearly 18 months, and the market’s reaction on Friday showed that investors were glad there was some progress in the form of the suspension of the increase in tariffs that was expected to come on Tuesday.

Derek Scissors, resident scholar at the American Enterprise Institute, said the Friday announcement was indeed a first step, but added on CNBC, “you have to walk before you can run.”

RELATED: Lenovo, HP and Dell push 3% PC surge in third quarter

**Semi stocks rose even higher in late afternoon before the tentative deal was announced, and then some declined in the final half hour when it was clear there was only a partial deal with no resolution on December tariffs and the Huawei situation..  At close, two semi ETFs split, with SOXS down by 6.6% and SOXL up by 6.7%

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