Potentially encouraging news on trade and interest rates put Wall Street in a buying mood Tuesday, driving the stock market to solid gains and sending the Dow Jones industrial average up 350 points.
Technology stocks powered much of the rally as investors welcomed news that the leaders of the United States and China will meet face-to-face next week to discuss their long-running trade dispute. Traders have been hoping for any positive sign in the trade war between the world’s two largest economies.
It’s not the first time the market has rallied on seemingly encouraging developments on trade. Previous positive signs did not pan out, triggering market turbulence.
“You sort of have to ignore [the trade war] a little bit,” said Tobias Carlisle, founder and portfolio manager at Acquirers Funds. “It’s probably going to drag out to the end of the year, so what we’re trying to do is buy something undervalued, and it’s great when there’s a day like today and it works.”
Markets also got a boost after the head of the European Central Bank said it was ready to cut interest rates and provide additional economic stimulus if necessary. The remarks put the spotlight on the Federal Reserve, which is set to announce its own decision on interest rates Wednesday.
The benchmark Standard & Poor’s 500 index rose 28.08 points, or 1%, to 2,917.75. The Dow climbed 353.01 points, or 1.4%, to 26,465.54. The Nasdaq, which is heavily weighted with technology companies, climbed 108.86 points, or 1.4%, to 7,953.88. The Russell 2000 index of smaller companies rose 17.48 points, or 1.1%, to 1,550.23.
It was the second straight gain for the market, extending stocks’ strong rebound this month after their steep sell-off in May.
The S&P 500 is now less than 1% below its all-time high, which it set April 30. The Dow is 1.4% below its Oct. 3 record high. The Nasdaq is about 2.5% below its May 3 record high.
The wave of buying got its start overseas early Tuesday after the remarks from the head of the ECB. Major indexes in Europe closed sharply higher.
President Trump stirred fresh optimism among investors when he said he will hold talks with Chinese President Xi Jinping at an international summit in Japan. U.S. businesses have implored Trump to stop escalating the trade war and refrain from applying tariffs to an additional $300 billion worth of goods from China.
A prospective meeting between the U.S. and Chinese leaders is welcome news for a market that has been searching for some direction. “If you think back a week ago, there was a fear they wouldn’t even talk at all,” said J.J. Kinahan, chief market strategist at TD Ameritrade.
Investors were also looking ahead to the Federal Reserve’s interest-rate policy announcement Wednesday. Many are betting the central bank is headed for its first interest-rate cut in more than a decade.
Two weeks ago, Fed Chair Jerome H. Powell set off a rally on Wall Street after he signaled that the central bank is willing to cut interest rates to help stabilize the economy if the U.S.-China trade war starts to crimp growth. Any continued escalation could put the brakes on what is poised to be the longest economic expansion in U.S. history.
Most analysts say they think economic growth has slowed sharply in the April-through-June quarter to an annual rate of about 1.5%, only half the pace of the past year.
Investors collectively envision a Fed rate cut by July and possibly further cuts after that. Some are even betting on a rate cut this week. Many economists, though, think the Fed will wait until September at the earliest to announce its first drop in its benchmark short-term interest rate since 2008 and might not cut again in 2019. A few Fed watchers foresee no rate cut at all this year.
“I don’t know that the Fed is going to deliver what investors want because the market looks fairly frothy at the moment,” Carlisle said.
Technology-sector stocks powered much of the rally Tuesday. Apple gained 2.4%, and chipmakers Intel and Nvidia climbed 2.7% and 5.4%, respectively. Google’s parent company, Alphabet, rose 1%.
Banks rose. JPMorgan Chase picked up 1.4%. Bank of America rose 2.5%.
Industrial and consumer-related stocks also made big gains. General Electric climbed 3.7%, Caterpillar rose 2.4%, and Nike added 2.7%.
Utilities and consumer products companies fell, a sign that investors were stepping back from the safer-play sectors and taking on more risk.
SM Energy jumped 6.6% after the oil and natural gas company raised production forecasts.
U.S. government bond prices rose, sending yields lower. The yield on the 10-year Treasury note fell to 2.06%, down from late Monday’s 2.08%. That’s well below the 2.21% yield on the three-month Treasury bill.
In commodities trading, benchmark crude oil rose 3.8% to settle at $53.90 a barrel. Brent crude oil, the international standard, rose 2% to close at $62.14 a barrel. Wholesale gasoline rose 1.8% to $1.72 a gallon. Heating oil climbed 1.6% to $1.83 a gallon. Natural gas fell 2.4% to $2.33 per 1,000 cubic feet.
Gold fell 0.6% to $1,350.70 an ounce. Silver rose 1.1% to $14.99 an ounce. Copper rose 2.1% to $2.70 a pound.