Optimism on trades boosts stock market

U.S. stocks gained as investors turned positive on the outlook for trade ahead of a meeting between the American and Chinese presidents.

The S&P 500 Index posted its largest weekly advance since 2011, helped by a dovish turn from the Federal Reserve. Oil’s brief dip below $50 a barrel Friday sent energy producers lower and buoyed airlines. Optimistic trade comments from U.S. and Chinese officials provided support for equities ahead of a Saturday dinner meeting between Donald Trump and Xi Jinping.

Ten-year Treasury yields resumed their drop toward 3 percent, while the dollar pushed higher. Crude capped its biggest monthly slump in a decade. Emerging-market equities slipped, though Chinese stocks advanced even as data showed the economy remains in a rough patch. The euro weakened with the region’s shares after data showed inflation easing in the region.

Any sign of a trade truce could tame the greenback’s gains and boost riskier assets including emergingmarket currencies and stocks. Trump on Thursday gave conflicting signals on his expectations for reaching a deal with Xi this weekend, as officials work on the contours of an accord that may delay ramping up tariffs on the Asian country in January. Goldman Sachs, however, said an escalation of tensions is the most likely outcome.

“The market really wants to see a deal with China,” said Peter Mallouk, the co-chief investment officer of Creative Planning, a wealth-management firm with about $36 billion in assets. “If we can get any kind of trade indication in the coming weeks that there was a path to getting a deal done, I think people would be surprised how positively the market would react to that kind of news.”

The first official gauge of China’s economy in November showed manufacturing activity continued to worsen, indicating the authorities will need to keep using stimulus measures as economic growth slows. On Thursday in the U.S., minutes from the Federal Reserve’s last policy meeting showed the central bank preparing for a more flexible path in 2019.