U.S. stocks posted strongest gains Thursday after Beijing indicated it wasn’t in a rush to respond to the latest round of tariffs imposed by Washington.
How did the major benchmarks faring?
The Dow Jones Industrial Average DJIA, +1.25% advanced 326.15 points, or 1.3%, to end at 26,362.25, while the S&P 500 index SPX, +1.27% rose 36.64 points, or 1.3%, to finish at 2,924.58. The Nasdaq Composite Index COMP, +1.48% added 116.51 points, or 1.5%, to close at 7,973.39.
This week’s rebound has slashed month-to-date losses for the major indexes, with the S&P 500 down and Dow down 1.9%, while the Nasdaq is off 2.5%. The S&P 500 and Dow are each less than 4% below all-time closing highs set in July, while the Nasdaq remains around 4.2% below its peak.
What drove the market?
A spokesman for China’s commerce ministry was quoted in news reports as saying the country wouldn’t immediately respond to the latest round of tariff increases announced by President Donald Trump on Friday. Those increases came after Beijing announced a round of retaliatory tariffs.
The spokesman, Gao Feng, said “the question that should be discussed now is about removing the new tariffs to prevent escalation.” He also said both sides were discussing a planned meeting next month of trade negotiators.
“The largely hopeful tones of the update from China has lifted market sentiment, and that sparked buying this morning,” said David Madden, market analyst at CMC Markets UK, in a note. “U.S.-China relations have been volatile recently, but for now there is a sense that things are heading in the right direction, and that has coaxed some traders back into the market.”
Investors also parsed series of economic reports, including a revision of second-quarter GDP growth that showed the U.S. economy growing at a 2% annual rate rather than the previously reported 2.1%. Economists surveyed by MarketWatch had expected the revision to show 1.9% growth. The revised numbers also showed the U.S. consumer playing an even larger role in economic growth than before, as personal consumption accounted for 3.1 percentage points of growth, versus the initially reported 2.9.
“In general GDP is down decidedly from last year, as ongoing trade tensions continue to put pressure on U.S. performance,” Mike Loewengart, vice president of investment strategy at E-Trade wrote in an email. “While there is no doubt that the economy is cooling, taking this morning’s read into historical context, we’re actually still chugging along.”
New applications for jobless benefits rose by 4,000 to a seasonally adjusted 215,000 during the week ended Aug. 24, slightly above economist expectations of 214,000, per a MarketWatch poll.
Stocks have pulled back in August in sometimes volatile trade as the U.S.-China trade war escalated with rounds of tit-for-tat tariff escalations and increasingly harsh rhetoric on both sides, which has also been blamed for heightening worries over the global economic outlook and stoking fears of a possible U.S. recession.
Analysts also pointed to the calendar as a reason for higher equity prices in recent days, as investors rebalance their portfolios heading into September. “There’s a lot of evidence of month-end book squaring, as a lot of the worst performing sectors month-to-date outperformed yesterday, despite the lack of a discernible positive catalyst,” wrote Tom Essaye, president of the Sevens Report, in a Thursday note to clients.
Pending home sales fell by 2.5% in July, according to the National Association of Realtors, versus a decline of 0.3% expected by Economists polled by MarketWatch. The July goods trade deficit shrunk to $72.3 billion from $74.2 billion a month earlier, lower than the $75 billion consensus.
Which stocks were in focus?
Shares of Dollar General Corp. DG, +10.68% added 10.7% after the discount retailer handily beat analyst estimates for sales and profits in the second quarter, while raising its outlook for the full-year 2019.
Tech Data Corp.’s TECD, +15.70% stock rose 15.7% after reporting fiscal third quarter results.
Shares of Dollar Tree Inc. DLTR, -1.94% declined 1.9%, after the retailer beat sales estimates for the second quarter but fell short of profit expectations and issued full-year earnings guidance below analyst forecasts.
How did other markets trade?
In commodities markets, the price of crude oil CLV19, +1.45% rose 1.3% to $56.52 per barrel, while the price of gold GCZ19, -0.81% ended the day 0.9% lower at $1534.6 per ounce. The value of the U.S. dollar, meanwhile, ticked 0.3% higher, according to the dollar index DXY, +0.24%.
European stocks rallied Thursday, with the Stoxx Europe 600 SXXP, +1.04% closing 1% higher.