Stocks post gains on solid earnings, U.S.-China trade optimism

The S&P 500 closed just short of an all-time high Friday as investors welcomed solid company earnings reports and an encouraging update on trade talks between the U.S. and China.

Technology, communications services and financial stocks powered the rally. The index ended within 0.1% of its record set July 26. It also notched its third straight weekly gain.

Strong earnings reports from Intel, Charter Communications and other companies helped reverse a mixed start.

The buying accelerated around midday after the U.S. Trade Representative’s office said the discussions with China’s negotiating team “made headway and the two sides are close to finalizing some sections of the agreement.”

The encouraging update gave the market a boost, but it wasn’t enough to sustain a record close for the S&P 500. For that to happen, a broader variety of the market’s sectors must to do well, not just technology, utilities and real estate stocks, said Willie Delwiche, investment strategist at Baird.

“You’ve had indexes around the world make new highs since the last time the S&P did,” he said. “If we want to see a new high that’s going to be durable we need to see more U.S. broad market improvement. It’s heading in that direction, but it’s not there yet.”

The S&P 500 rose 12.26 points, or 0.4%, to 3,022.55.

The Dow Jones Industrial Average gained 152.53 points, or 0.6%, to 26,958.06. The Nasdaq climbed 57.32 points, or 0.7%, or 8,243.12. The Russell 2000 index of smaller stocks picked up 8.53 points, or 0.6%, to 1,558.71.

The U.S.-China trade conflict, which has led both sides to impose billions in tariffs on each other’s goods, has roiled financial markets and stoked worries that the dispute could tip the global economy into a recession.

Those worries eased in recent weeks, after Washington and Beijing worked to calm tensions and then resumed negotiations.

That’s allowed investors to focus on company earnings reports the past two weeks. Traders want to get a sense of how Corporate America is faring against the backdrop of the costly trade war between the world’s two biggest economies.

Earnings reports so far have mostly exceeded Wall Street analysts’ modest expectations. However, many of those that delivered improved results for the quarter have also issued disappointing profit outlooks.