Markets’ reaction
» The S&P 500 and Nasdaq closed at all-time highs.
The S&P 500 and Nasdaq closed at all-time highs Thursday on renewed optimism that the U.S. and China are close to reaching a deal in their costly trade war.
Financial, technology and health care stocks powered much of the rally, which gave the S&P 500 its second straight gain and erased its losses from earlier in the week.
Bond yields surged and real estate companies, utilities stocks and makers of household goods fell as investors shifted money away from safe-play investments.
The market has been quick to react to headlines and remarks out of the Trump administration about the 16-month trade war, and Thursday was no different.
Shares jumped in the early going after President Donald Trump said that the U.S. is getting close to a “big deal” with China. Traders were also encouraged by a Wall Street Journal report saying Washington has offered to slash existing tariffs and cancel new ones set to kick in on Sunday in exchange for more agricultural purchases and intellectual property protection.
“If we do see the tariffs removed, that’s saying, ‘OK, China must be agreeing to things or we must be right there,’ ” said Ben Phillips, chief investment officer at EventShares. “That’s why the market is looking at tariffs as the bellwether to a trade deal.”
The S&P 500 climbed 26.94 points, or 0.9 percent, to 3,168.57. The index is up about 0.5 percent from its last all-time closing high on Nov. 27.
The Dow Jones Industrial Average rose 220.75, or 0.8 percent, to 28,132.05. The Nasdaq gained 63.27 points, or 0.7 percent, to 8,717.32. The index, which is heavily weighted with technology stocks, is now up about 0.1 percent its record set on Nov. 27.
The Russell 2000 index of smaller company stocks climbed 12.89 points, or 0.8 percent, to 1,644.81.
Uncertainty over trade has been the biggest wildcard for stocks this year. The long-standing conflict has hurt manufacturing around the world and caused U.S. businesses to hold back on making investments. The saving grace for the economy has been a strong job market and consumer spending.
Speculation that the world’s two biggest economies could be close to reaching an interim “Phase 1” trade agreement spurred investors on Thursday to move money into technology, industrial and other stock sectors that tend to do well when the economy is growing.
“If we get a China trade deal, it’s probably going to catalyze another 12-plus months of growth in the U.S. and globally,” Phillips said.
While investors continue to wait for an official word on a possible deal, they’ll get a look at new economic data Friday. The Commerce Department is due to report its November snapshot of retail sales. Economists expect those numbers to have risen. The measure gives more insight into consumer spending, which has been among the brighter spots in the economy.