Stocks closed slightly higher Monday after shedding most of the gains from an early rally spurred by the Trump administration's decision to hold off on increasing tariffs on imported Chinese goods.
Investors welcomed the move, which averted an escalation in the damaging trade war between the world's two largest economies. The fight is over U.S. complaints that Beijing steals technology or pressures companies to hand it over.
Traders have been growing increasingly optimistic over the last two weeks that the U.S. and China are moving closer to a resolution of their dispute. That's helped lift stocks in recent weeks, gains which some analysts say suggest the market is already viewing an agreement as a done deal.
“You can attribute much of today's gains to trade,” said Lindsey Bell, investment strategist at CFRA. “The closer we get to a deal getting done or some agreement being made, the smaller the gains are becoming.”
Technology companies and banks accounted for much of the market's gains, outweighing losses in consumer goods stocks and other sectors. Oil prices fell sharply after President Trump said they were getting too high. On Friday, oil closed at the highest level since mid-November.
The S&P 500 index added 3.44 points, or 0.1%, to 2,796.11. The benchmark index has finished higher the past four weeks in a row.
The Dow Jones Industrial average gained 60.14 points, or 0.2%, to 26,091.95. Earlier in the day it was up more than 209 points.
The Nasdaq composite rose 26.92 points, or 0.4%, to 7,554.46. The Russell 2000 index of smaller companies dropped 1.26 points, or 0.1%, to 1,588.81.
Progress in the U.S.-China trade talks also helped lift markets broadly in Europe and Asia, where China's main index, the Shanghai Composite, jumped to an eight-month high.
China faced a March 2 deadline, when the U.S. would have increased punitive duties on $200 billion worth of Chinese imports.
Trump, who did not set a new deadline Monday, said there had been “productive talks” on some of the more difficult issues and added he's willing to meet with Chinese President Xi Jinping if negotiations progress.
The trade war and its hefty tariffs have already raised costs for businesses and consumers. Any additional escalation could shake investor confidence as an economic slowdown looms over China and Europe.
“I feel like we're in a position where the president is interested in making deals,” said Jamie Cox, managing partner at Harris Financial Group.
The U.S. election cycle is just around the corner, giving the president an incentive to pursue deals and keep the economy and markets stable, he said. Even so, markets may be too optimistic about what's possible in any China deal, as negotiations over intellectual property concerns will likely take more time.
Investors need to remain cautious, Cox said, citing soft economic data, including the surprise drop in retail sales in December.
“This is sort of an economic opportunity for investors to rebalance, to get a little less aggressive in their portfolios,” he said.
Beyond trade, investors had their eye on the latest corporate news and earnings reports.
General Electric rose 6.4% after the industrial giant announced plans to sell a biotech unit to Danaher for $21.4 billion. The sale is yet another step down in size for GE, which has been divesting businesses since getting hurt in the financial crisis a decade ago.
Shares in Spark Therapeutics more than doubled after pharmaceutical giant Roche offered to by the gene therapy company for about $4.8 billion. Roche is snapping up the company as its rivals also look to gene therapy as a way to build up their potential drug pipelines. The focus is treatment for rare diseases, which often involves very costly drugs.
Carter's Inc. jumped 8.1% after the maker of children's clothing reported strong profit growth in the fourth quarter and forecast further gains in 2019.
Western Digital led technology sector stocks after the data storage company announced a new flash memory card capable of holding up to a terabyte of information. The stock climbed 3.8%.
U.S. crude lost 3.1% to settle at $55.48 a barrel in New York after Trump criticized rising oil prices in an early morning tweet.
Prices are up about 20% so far this year. On Friday, oil ended at $57.26 a barrel, the highest level since November 12, when it closed at $59.93.
Brent crude, used to price international oils, fell 3.5% to close at $64.76 a barrel in London.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.67% from 2.65% late Friday.
The dollar fell to 110.15 yen from 110.71 yen on Friday. The euro strengthened to $1.1364 from $1.1337.
Gold fell 0.2% to $1,329.50 an ounce. Silver lost 0.5% to $15.83 an ounce. Copper dropped 0.2% to $2.95 a pound.