The S&P 500 on Friday closed just short of an all-time high as investors welcomed solid company earnings reports and an encouraging update on trade talks between the US and China.
Technology, communications services and financial stocks powered the rally. The index ended within 0.1 percent of its record set on July 26. It also notched its third straight weekly gain.
Strong earnings reports from Intel Corp, Charter Communications Inc and other companies helped reverse a mixed start.
The buying accelerated at about noon after the US Trade Representative’s office said that 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 was not 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, Robert W. Baird & Co investment strategist Willie Delwiche said.
“You’ve had indexes around the world make new highs since the last time the S&P did,” Delwiche said. “If we want to see a new high that’s going to be durable, we need to see more US broad market improvement. It’s heading in that direction, but it’s not there yet.”
The S&P 500 on Friday rose 12.26 points, or 0.4 percent, to 3,022.55, jumping 1.2 percent from a close of 2,986.20 on Oct. 18.
The Dow Jones Industrial Average on Friday gained 152.53 points, or 0.6 percent, to 26,958.06, a gain of 0.7 percent from 26,770.20 a week earlier.
The NASDAQ on Friday climbed 57.32 points, or 0.7 percent, to 8,243.12, surging 1.9 percent from 8,089.54 on Oct. 18.
The Russell 2000 index of smaller stocks on Friday picked up 8.53 points, or 0.6 percent, to 1,558.71, a jump of 1.5 percent from a close of 1,535.48 a week earlier.
The US-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 the past few weeks, after Washington and Beijing worked to calm tensions and then resumed negotiations.
That has 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.
Of the about 40 percent of the companies in the S&P 500 that have reported so far, 80 percent had results that topped Wall Street’s earnings forecasts, while 64 percent beat revenue estimates, FactSet Research Systems Inc data showed.
Factoring in the earnings reports that have already come in, analysts expect earnings from S&P 500 companies for the quarter ended last month to be down 3.7 percent from a year earlier. That is slightly better than the 4 percent drop that analysts were initially expecting.
As of Friday, 38 companies in the S&P 500 had issued earnings forecasts for the fourth quarter. Of those, 26 issued negative guidance and 12 gave a positive outlook.
That works out to 68 percent of those companies lowering their guidance, which is just less than the five-year average of 70 percent, FactSet data showed.
Until this week, the market had a mostly muted reaction to earnings. In contrast, the S&P 500 notched gains four out of the past five days, rounding out the week with a three-day winning streak.
Intel jumped 8.1 percent after raising its profit forecast for the year following a solid third quarter. Fellow chipmakers, including Nvidia Corp, also made strong gains.
Charter Communications gained 6.2 percent after reporting solid financial results. The cable operator made some of the strongest gains among telecommunications companies.
Banks rose as bond yields moved higher. The yield on the 10-year US Treasury note rose from 1.76 percent to 1.8% late on Thursday.
Consumer product makers, utilities and real-estate companies lagged the market.
Amazon.com Inc fell 1.1 percent after releasing disappointing third-quarter profits and a weak sales forecast for the holiday shopping season.
A robust mix of earnings, economic indicators and an interest rate decision from the US Federal Reserve should keep investors busy next week, and could determine whether the S&P 500 sets a record.
Alphabet Inc, Google’s parent company, is to report its earnings tomorrow; General Motors Co and drugmakers Merck KGaA and Pfizer Inc on Tuesday; Apple Inc and Facebook Inc on Wednesday; and Exxon on Friday.
Beyond earnings, the Fed is to issue its latest interest rate policy statement on Wednesday afternoon, while the US government is to release its latest monthly reports on hiring and consumer confidence.
“The big focus will be the Fed,” Delwiche said. “They’re likely to cut rates. If they didn’t, that would come as a surprise. The uncertainty is what sort of guidance they give going forward.”
Additional reporting by staff writer
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