Trade talks again give stocks a lift

Stocks finished broadly higher Wednesday as investors remained optimistic that the U.S. and China will make more progress in resolving their costly trade dispute.

Energy companies, retailers and industrial stocks accounted for much of the gains.

The S&P 500 index gained 8.30 points, or 0.3 percent, to 2,753.03. The Dow Jones industrial average climbed 117.51 points, or 0.5 percent, to 25,543.27. The Nasdaq composite added 5.76 points, or 0.1 percent, to 7,420.38. The Russell 2000 index of smaller-company stocks, which has been leading the other indexes this year, added 4.71 points, or 0.3 percent, to 1,542.94.

Key officials from the world’s two largest economies will meet today and Friday to try to stave off an escalation of a trade conflict that has hurt companies and consumers by raising prices on a number of products. President Donald Trump has said he might let a March 1 deadline slide if the U.S. and China get close to a deal.

After that deadline, additional tariffs are scheduled to kick in. Economists and analysts are optimistic that both sides will eventually hammer out an agreement that satisfies U.S. complaints that China steals or pressures American companies to hand over technology.

“The president’s seemingly positive tone regarding trade has helped underpin the market, particularly the industrial names,” said Quincy Krosby, chief market strategist at Prudential Financial. “That’s a positive catalyst for the market.”

Major indexes in Europe also finished broadly higher, despite a report of slumping industrial output across the 19 countries that use the euro.

Companies on both sides of the U.S.-China dispute have been battered by Washington’s tariffs and retaliatory duties imposed by Beijing. The stakes are rising as global economic growth cools, which has contributed to a dimmer outlook for company earnings this year.

Still, the White House’s remarks about the trade talks this week have helped alleviate some uncertainty for the market.

“The momentum that we saw yesterday has certainly carried through today,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank.

The market briefly lost some of that momentum around midmorning Wednesday as U.S. Sen. Marco Rubio announced over Twitter plans to introduce a bill aimed at deterring companies from buying back their own stock. The Republican from Florida said the argument that stock buybacks free up money for companies to reinvest in growth “isn’t backed up by the facts.”

Corporate stock buybacks hit new highs last year, led by technology companies.

Buybacks, in which companies purchase their own shares and retire them, are popular with investors because having fewer outstanding shares will lift a company’s earnings per share, the most watched barometer of corporate success.

The sweeping tax law passed by the GOP-led Congress in late 2017 gave companies an incentive to boost their stock prices.

Rubio’s bill would tax corporate share buybacks to the same degree as dividends, with the goal of giving “permanent preference to investments that will drive the creation of jobs and increase wages,” Rubio tweeted.

The prospect of such a bill appeared to ruffle the markets briefly, Krosby said.

“The fact is you have the Senate controlled by the Republicans, so it’s hard to imagine you’re going to see a vote,” she said. “Maybe that’s why the market is still up.”