Stocks in the US on Friday jumped as renewed hopes for progress in trade talks between the US and China helped the market finish the week with another strong gain.
Indices jumped after Bloomberg News reported that China’s government offered to buy more goods and services from the US, potentially eliminating its trade deficit by 2024.
For investors, the encouraging news on trade built on positive signs for the US economy and indications from the US Federal Reserve that it would be patient when considering future interest rate hikes.
The Dow Jones Industrial Average is up 5.9 percent and the S&P 500 has risen 6.5 percent this year, a surprisingly strong showing coming off a punishing end to last year.
Technology and industrial companies made some of the top gains, while banks rose after a round of solid fourth-quarter earnings reports.
Oil and copper prices rose, while gold and bond prices fell. Those are all signs traders felt more optimistic about global economic growth.
Over the past few days investors grew steadily more hopeful that the US and China are narrowing their differences over trade.
On Wednesday, the Chinese government said that the top trade envoys from both countries would meet at the end of this month.
“What you can see that is significant is that both sides are trying,” Globalt Investments senior portfolio manager Tom Martin said.
“Everybody feels like they’ve now made their point” after the two nations spent most of last year staking out positions and occasionally making threats, he said.
The Fed has also made a big contribution to the rally, he added.
The S&P 500 on Friday climbed 34.75 points, or 1.3 percent, to 2,670.71, jumping 2.9 percent from a close of 2,596.26 on Jan. 11.
The Dow Jones Industrial Average on Friday jumped 336.25 points, or 1.4 percent, to 24,706.35, a nearly 3 percent surge from 23,995.95 a week earlier.
The NASDAQ Composite on Friday added 72.76 points, or 1 percent, to 7,157.23, rising 2.7 percent from a close of 6,971.48 on Jan. 11.
Stock indices have surged since reaching a low point on Christmas Eve, as the S&P 500 has risen for four weeks in a row. It has risen at least 1.9 percent every week during that rally.
The last time the index rose at least 1.5 percent for four weeks in a row was in early 2009, in the wake of the financial crisis, LPL Financial LLC senior market strategist Ryan Detrick said.
The US trade imbalance with China has been a source of constant complaints from US President Donald Trump. That deficit last year grew to a record US$323.3 billion and eliminating it could mean hundreds of billions of dollars in increased sales for US companies.
The two countries have raised tariffs on billions of dollars of each other’s goods in the spat over the trade deficit, Beijing’s manufacturing plans and US complaints that China steals technology from foreign companies.
Stocks late last year sank as investors worried that global economic growth, and US growth in particular, would slow significantly. Threats including the US-China trade dispute; rising interest rates in the US; slowing growth in China and Europe; and unstable political situations like Brexit all made it seem like this year could be a disappointing year and some investors felt a recession was a possibility.
However, now they are starting to think it will not get that bad.
There are signs that the trade talks are progressing. The US economy does not appear to have slowed much and China is working to perk up its economy. Resolving the trade dispute would also resolve an obstacle to growth for the global economy and corporate profits.
The S&P 500, the main benchmark for US stocks, fell 19.8 percent from late September last year to late last month and has recovered more than half of those losses.
Trucking and logistics company J.B. Hunt Transport Services Inc jumped 6.2 percent to US$106.11 and railroad company Kansas City Southern climbed 6.1 percent to US$110.52 after their fourth-quarter reports.
Tesla Inc fell 13 percent to US$302.26 after the company said that it would cut 7 percent of its workforce.
Tesla CEO Elon Musk said that the cuts are meant to reduce costs as the company lowers the price for its cars.
He said in a note to staff that the road ahead is “very difficult.”
Additional reporting by staff writer
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