Stocks in the U.S. and Europe jumped Friday as renewed hopes for progress in trade talks between the U.S. and China helped the markets finish the week with another strong gain.
Indexes jumped after Bloomberg News reported that China’s government offered to buy more goods and services from the U.S., potentially eliminating its trade deficit by 2024. For investors, the encouraging news on trade builds on recent positive signs for the U.S. economy and indications from the Federal Reserve that it will be patient when considering future interest rate hikes.
The Dow Jones Industrial Average is up 5.9 percent and the S&P 500 index has risen 6.5 percent so far this year, a surprisingly strong showing coming off a punishing end to 2018.
Technology and industrial companies made some of the top gains, while banks rose after around 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 last few days investors grew steadily more hopeful the U.S. and China are narrowing their differences over trade. On Wednesday the Chinese government said the top trade envoys from both countries will meet at the end of January.
“What you can see that is significant is that both sides are trying,” said Tom Martin, senior portfolio manager of Globalt Investments. “Everybody feels like they’ve now made their point” after the two nations spent most of 2018 staking out positions and occasionally making threats.
Martin said the Federal Reserve has also made a big contribution to the rally.
The S&P 500 climbed 34.75 points, or 1.3 percent, to 2,670.71. The Dow jumped 336.25 points, or 1.4 percent, to 24,706.35. The Nasdaq composite added 72.76 points, or 1 percent, to 7,157.23.
Stock indexes have surged since reaching a low point on Christmas Eve, as the S&P 500 has risen for four weeks in a row. It climbed 2.9 percent this week. It’s 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, according to LPL Financial Senior Market Strategist Ryan Detrick.
The U.S. trade imbalance with China has been a source of constant complaints from President Donald Trump. That deficit grew to a record $323.3 billion in 2018, and eliminating it could mean hundreds of billions of dollars in increased sales for U.S. companies. The two countries have raised taxes on billions of dollars of each other’s goods in the spat over the trade deficit, Beijing’s manufacturing plans, and U.S. complaints that China steals technology from foreign companies.
Stocks sank in late 2018 as investors worried that global economic growth, and U.S. growth in particular, would slow significantly. Threats including the U.S.-China trade dispute, rising interest rates in the U.S., slowing growth in China and Europe, and unstable political situations like Brexit all made it seem like 2019 could be a disappointing year and some investors felt a recession was a possibility.
But now they’re starting to think it won’t get that bad. There are signs trade talks are progressing. The U.S. economy doesn’t 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 U.S. stocks, fell 19.8 percent from late September to late December and has recovered more than half of those losses.
Trucking and logistics company J.B. Hunt Transportation jumped 6.2 percent to $106.11 and railroad company Kansas City Southern climbed 6.1 percent to $110.52 after their fourth-quarter reports.
European stocks jumped. Germany’s DAX climbed 2.6 percent and the FTSE 100 in Britain rose 2 percent. The French CAC 40 gained 1.7 percent.
Faster economic growth would mean more demand for oil, and prices climbed. U.S. crude rose 3.3 percent to $53.80 in New York. Brent crude, used to price international oils, added 2.5 percent to $62.70 a barrel in London.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.79 percent from 2.74 percent. High-dividend stocks like utilities lagged the rest of the market. They tend to rise when investors are worried about the economy.
Tesla fell 13 percent to $302.26 after the company said it would cut 7 percent of its jobs. CEO Elon Musk said 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.”
Asian stocks also finished higher. Hong Kong’s Hang Seng gained 1.2 percent and the Nikkei 225 in Japan rose 1.3 percent. Seoul’s Kospi added 0.8 percent.
In other commodities trading, wholesale gasoline rose 1.6 percent to $1.45 a gallon and heating oil added 1.6 percent to $1.92 a gallon. Natural gas jumped 2 percent to $3.48 per 1,000 cubic feet.
Gold dropped 0.8 percent to $1,282.70 an ounce and silver fell 0.9 percent to $15.40 an ounce. Copper rose 1.5 percent to $2.72 a pound.
The dollar rose to 109.79 yen from 109.23 yen. The euro fell to $1.1370 from $1.1390.