Dow, S&P 500 rise with hope for US-China talks: Best Buy big loser
Stocks marched broadly higher in afternoon trading on Wall Street Thursday, adding to the market’s solid gains from a day earlier.
The rally came as investors held out fresh hope that new talks between the U.S. and China set for September can lead to progress in the nations’ ongoing trade war.
Technology companies accounted for a big slice of the gains. Microsoft rose 1.9% and Apple added 1.6%. Financial and communications services stocks also were big winners. JPMorgan climbed 2.5% and Facebook rose 2.1%.
Retailers were also doing well. Discount store chain Dollar General led the way after reporting quarterly results that topped Wall Street’s forecasts. A broad swath of retailers was trading higher. Walmart gained 1.3%, Macy’s rose 2.3% and Amazon added 1.6%.
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In another sign that investors were feeling more optimistic, demand for U.S. government bonds showed signs of waning after surging in recent weeks amid recession worries.
Even so, long-term bond yields remained even with short-term ones, just shy of a so-called inversion in the U.S. yield curve that has correctly predicted previous recessions.
Bond prices fell, sending the yield on the 10-year Treasury up to 1.52% from 1.47% late Wednesday. The 2-year Treasury rose to 1.52% from 1.49% the day before. The yield for the 10-year Treasury has been dipping below that of the 2-year this week.
While an inverted yield curve has preceded every U.S. recession, it is not a signal that one is imminent. It has taken 14 to 34 months for past recessions to begin following a yield curve inversion.
Uncertainty over the U.S.-China trade conflict and it impact on corporate profits has rattled investors this month.
The market is on track to end the week with a gain after having declined the past four weeks in a row. The major indexes are still down more than 2% as the month draws to a close. If those losses hold, August would be the second monthly drop for the market this year after May.
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S&P 500, Dow pop up
The S&P 500 was up 1.4% as of 12:38 p.m. Eastern Time. The Dow Jones Industrial Average climbed 359 points, or 1.4%, to 26,393. The Nasdaq gained 1.6%.
Investors favored smaller company stocks for the second straight day. The Russell 2000 index was up 1.5%.
Major stock indexes in Europe were broadly higher.
Trade war optimism
A published report noted that China’s commerce ministry said it is discussing the next round of in-person trade negotiations with the U.S. to held next month.
In an interview with Bloomberg, Treasury Secretary Steven Mnuchin said talks with China are ongoing and are expected to continue in Washington, though he did not specify when.
Trade negotiators are due to meet in September for new negotiations, though there has been no sign of progress in recent days since an escalation by both sides earlier this month.
Last week, the trade conflict escalated again with both sides threatening new tariffs on each other’s goods, triggering a sharp sell-off in global markets.
Investors worry the spiraling tariff war over trade and technology could tip the global economy into recession.
Eye on the economy
Investors shrugged off new data showing the U.S. economy grew at a slower pace in the second quarter. The government reported that gross domestic product, the broadest gauge of economic health, advanced at a moderate 2% annual rate in the April-June quarter, down from a 3.1% gain in the first quarter. The figure was lower than the government’s initial estimate a month ago of 2.1% growth.
In a separate report Thursday, the Labor Department said that the number of Americans filing claims for unemployment benefits, a proxy for layoffs, rose by 4,000 last week to a still-low 215,000. Economists believe this weekly indicator will be one of the first signs to show if the economy is starting to falter.
Even though the economy is slowing, one encouraging sign is that consumer spending, which drives about 70% of growth, accelerated last quarter at the fastest pace in nearly five years. At the same time, business investment, which has weakened in the face of the Trump administration’s trade wars, was revised lower and subtracted from growth in the April-June period.
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Raking in the bucks
Shares in Dollar General jumped 9.6% after the discount retailer reported quarterly results that were better than analysts were expecting. Rival Dollar Tree gave up an early gain, sliding 1.7%.
Not good enough
Best Buy slumped 9.3%, the biggest decliner in the S&P 500, after the consumer electronics chain reported strong quarterly profit but disappointing revenue growth.