US stocks on Friday soared and reversed the big losses they suffered just a day earlier. The Dow Jones Industrial Average rallied 746 points in the latest twist in a wild three months for markets.
Hopes for progress in a US-China trade dispute, a strong report on the US jobs market and encouraging comments from the head of the US central bank about its interest rate policy all combined to cheer investors.
The Chinese Ministry of Commerce said that trade talks would be held tomorrow and on Tuesday in Beijing, and investors will again look for signs the world’s largest economies are resolving their dispute.
The tensions have dragged on for nearly a year, slowing business and dragging down stock indices worldwide.
Meanwhile, the US Department of Labor said that US employers last month added 312,000 jobs, a far stronger result than experts had anticipated.
US stocks have tumbled since October last year, as investors worried that the economy might slow down dramatically because of challenges including the trade dispute and rising interest rates.
The stock market’s plunge also threatened to shake up the confidence and the spending plans of businesses and consumers.
Investors were acting as if a recession was on the horizon, despite a lack of evidence that the US economy is struggling, some analysts said.
“It’s hard to square recession worries with the strongest job growth we’ve seen in years,” FTSE Russell managing director of global markets research Alec Young said.
Stocks rose even further after US Federal Reserve Chairman Jerome Powell said that the central bank would be flexible in deciding if and when it raises interest rates.
The Fed is open to making changes in the way it shrinks its giant portfolio of bonds, which affects rates on long-term loans such as mortgages, he added.
Until recently, the Fed had suggested that it planned to raise short-term interest rates three times this year and next, with Powell saying that the Fed’s balance sheet was shrinking “on autopilot.”
Wall Street feared that the Fed might be moving too fast in raising borrowing costs, Federated Investors chief equity market strategist Phil Orlando said.
The Fed’s interest rate and bond portfolio policies “were at the top of the list of things we were concerned about, which is why the statement Powell made today is so supportive of the market,” Orlando said.
“The Fed understands that what they attempted to communicate last month was inartful, that they didn’t get the right message across, and Powell tried to reset,” he said.
The S&P 500 on Friday climbed 84.05 points, or 3.4 percent, to 2,531.94, more than wiping out Thursday’s loss and rising 1.9 percent from a close of 2,485.74 on Dec. 28.
The Dow on Friday rose 3.3 percent to 23,433.16 after gaining 832 points in afternoon trading and gained 1.6 percent from 23,062.40 a week earlier.
The NASDAQ Composite on Friday jumped 275.35 points, or 4.3 percent, to 6,738.86, up 2.3 percent from a close of 6,584.52 on Dec. 28.
About 90 percent of shares of companies listed on the New York Stock Exchange traded higher.
Stocks on Thursday sank after Apple Inc said that iPhone sales in China were falling, partly because of the trade fight, and a survey suggested that US factories grew at a weaker pace. Technology companies took their biggest losses in seven years.
Technology companies, banks, healthcare and industrial companies all made strong gains. Most of the companies in those industries stand to do better in times of faster economic growth.
Smaller and more US-focused companies did even better than larger multinationals.
The Russell 2000 index on Friday surged 49.92 points, or 3.8 percent, to 1,380.75, surging 3.2 percent from 1,337.92 a week earlier.
Smaller companies have fallen further than larger ones in the past few months as investors got nervous about how the US economy would perform this year and next.
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