Stocks keep climbing as hopes for US-China trade deal rise
NEW YORK (AP) -- Stocks in the U.S. and Europe are surging Friday as renewed hopes for progress in trade talks between the U.S. and China contribute to the market's newfound optimism.
Stocks rallied 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. Technology and industrial companies made some of the top gains, while banks rose after more of them posted strong fourth-quarter reports.
Stock indexes have made big gains since reaching a low point on Christmas Eve, as the S&P 500 has risen for four weeks in a row.
KEEPING SCORE: The S&P 500 index rose 32 points, or 1.3 percent, to 2,668 as of 11:30 a.m. Eastern time. The Dow Jones Industrial Average gained 278 points, or 1.1 percent, to 24,648. The Nasdaq composite added 87 points, or 1.2 percent, to 7,171. The Russell 2000 index of smaller and more U.S.-focused companies picked up 15 points, or 1.1 percent, to 1,482.
The S&P 500 is up 2.6 percent this week and has risen at least 1.9 percent every week during the rally. It's been a long time since stocks had a similar winning streak: according to Ryan Detrick of LPL Financial, the last time the S&P 500 rose at least 1.5 percent a week for four weeks in a row was in early 2009. That was immediately after the stock market hit its low point in the wake of the 2007-2008 financial crisis that caused the Great Recession. That streak lasted for six weeks.
TRADE TALKS: President Donald Trump has complained repeatedly about the U.S. trade deficit with China. It 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 wide-ranging fight over the trade deficit, Beijing's manufacturing plans, and U.S. complaints that China steals technology from foreign companies or forces them to hand it over.
Stocks sank in late 2018 as investors worried that global economic growth, and U.S. growth in particular, would get worse than they thought. 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 was going to be a disappointing year. Some investors felt a recession in the U.S. or the global economy was a possibility in late 2019 or in 2020.
But investors are starting to think it won't get that bad. There are signs the U.S. and China are making gradual progress and the U.S. economy doesn't appear to have slowed much. The Federal Reserve has suggested it won't raise interest rates much further in light of slowing growth and the stock market's recent turmoil. The S&P 500, the main benchmark for U.S. stocks, fell 19.8 percent from late September to late December and has recovered slightly more than half of those losses.
MACHINE EARNING: Trucking and logistics company J.B. Hunt Transportation jumped 7.3 percent to $107.21 and railroad company Kansas City Southern climbed 5 percent to $109.37 after their fourth-quarter reports. Farm equipment maker Deere gained 3.1 percent to $165.07.
Among technology companies, software maker Oracle added 1.5 percent to $49.32 and chipmaker Broadcom rallied 2.4 percent to $261.41.
BANKS: Financial stocks continued to do better than the rest of the market. SunTrust jumped 4.7 percent to $60.77. Many large banks reported their fourth-quarter results this week, and they've benefited from gradually rising interest rates as well as the corporate tax cut and other tax law changes at the end of 2017. Bank stocks had a bad year in 2018, in large part because investors weren't sure where interest rates would go. But the stocks tend to do better when traders feel better about the health of the economy because when it's growing, businesses and individuals tend to take out more loans. The S&P 500's index of bank stocks has jumped 9 percent over the last month, while the S&P 500 itself is up almost 5 percent.
GROWTH HOPES: Resolving the trade dispute would resolve an obstacle to growth for the global economy and corporate profits. European stocks jumped. Germany's DAX climbed 2.6 percent and the FTSE 100 in Britain rose 1 percent. The French CAC 40 gained 1.7 percent.
Benchmark U.S. crude jumped 2.8 percent to $53.54 in New York. Brent crude, used to price international oils, added 2.5 percent to $62.71 a barrel in London.
In another sign investors expect more growth, bond prices fell. The yield on the 10-year Treasury note rose to 2.78 percent from 2.74 percent.
TESLA CUTS: Tesla fell 9.5 percent to $314.37 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."
THE SHOE FITS: VF Corp, the maker of brands including Timberland and North Face, surged 11.9 percent to $81.97 after it raised its forecasts for the year.
ASIA: 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.
AP Markets Writer Marley Jay can be reached at http://twitter.com/MarleyJayAP