U.S. stocks climb on hope of Mexico trade deal
U.S. stocks finished higher Thursday for the third day in a row, powered by optimism that the United States and Mexico can work out a trade deal before costly tariffs kick in next week.
A modest rally gained strength in the final hour of trading after Bloomberg reported that the United States was considering delaying a 5% tariff on Mexican goods that is set to go into effect Monday.
The report came as the two countries held a second day of trade talks. Both sides claimed to be making progress, but President Trump insisted earlier in the day that a “lot of progress” had to be made before he would call off the tariffs.
Investors have been anxious about escalating trade disputes between the United States and key trading partners, primarily China. Worries that the trade conflicts will drag on, stifling economic growth and hurting corporate profits, drove a month-long sell-off in May. That derailed a market run during which the benchmark Standard & Poor’s 500 index set an all-time high April 30.
Stocks gave up more ground Monday, but the market has bounced back and is on track to end the first week of June with solid gains.
“History says, as a result of such a good start to the year, don’t be surprised that May is down, because it has been 60% of the time,” said Sam Stovall, chief investment strategist at CFRA. “Yet after a down May, we tend to get a reflex rally in June 100% of the time.”
The S&P 500 index rose 17.34 points, or 0.6%, to 2,843.49 on Thursday. The Dow Jones industrial average climbed 181.09 points, or 0.7%, to 25,720.66.
The Nasdaq composite reversed an early slide, finishing with a gain of 40.08 points, or 0.5%, at 7,615.55. The Russell 2000 index of smaller companies fell 3.25 points, or 0.2%, to 1,503.54.
Bond prices fell, pushing up the yield on the 10-year Treasury note to 2.13% from 2.12%.
U.S. and Mexican officials continued trade talks Thursday in a bid to avert import tariffs that Trump has threatened to impose unless Mexico acts to stem the flood of Central American migrants at America’s southern border.
Lawmakers who have been in talks with both U.S. and Mexican officials said they were hopeful a deal could be reached to satisfy Trump, or at least delay the tariffs.
The trade disputes with Mexico and China threaten to stifle economic growth in the U.S. and globally. Uncertainty surrounding the trade negotiations has sent many traders fleeing to safer investments, such as bonds and gold.
Still, investors have been in a buying mood most of this week because they’re betting the Federal Reserve will cut interest rates this year. Fed Chairman Jerome H. Powell said Tuesday that the central bank would “act as appropriate” if the Trump administration’s disputes with China and Mexico threatened U.S. economic expansion.
The government’s May jobs report, due out Friday, could prove a key factor in what the Fed does next. A separate gauge of employment growth by ADP, released this week, showed a sharp slowdown in hiring last month. Economists surveyed by FactSet project that the government will also report that hiring slowed last month.
Investors would prefer that Friday’s report show hiring was on the lighter side last month “because it would help keep the pressure off the Fed from certainly raising rates, but would give it an additional reason to lower rates,” Stovall said.
Technology companies, consumer-goods makers and financial firms were among the big gainers Thursday. Chipmaker Advanced Micro Devices jumped 7.9%, Campbell Soup advanced 2.6% and American Express gained 1.1%.
Crude oil prices rose, and energy stocks gained some ground after Wednesday’s broad sell-off. Occidental Petroleum shares rose 3.4%. Chevron gained 2.6%.
A smattering of company earnings results brought severe punishment or lavish rewards from investors.
Arts and crafts retailer Michaels plunged 12.4% after sales at established stores fell more sharply than Wall Street expected. The company also trimmed its full-year profit forecast.
Stitch Fix surged 14.7% after the online clothing styling service surprised investors with a fiscal third-quarter profit.
Ciena shares jumped 26.8% after the developer of high-speed networking technology beat Wall Street’s fiscal second-quarter forecasts.
Oil prices rebounded after Wednesday’s steep sell-off.
Benchmark U.S. crude rose 1.8% to $52.90 a barrel. Brent crude oil, the international standard, rose 1.7% to $61.67 a barrel.
U.S. crude has fallen in five of the last six weeks amid signs that China’s economic growth is slowing. Despite Thursday’s increase, it remains 20.7% below its 2019 closing high of $66.30, reached in April. The slide of more than 20% from a recent high puts U.S. crude in what Wall Street calls a bear market.
In other energy futures trading, wholesale gasoline rose 0.9% to $1.71 a gallon. Heating oil rose 0.5% to $1.79 a gallon. Natural gas slid 2.3% to $2.32 per 1,000 cubic feet.
Gold rose 0.7% to $1,342.70 an ounce. Silver rose 0.8% to $14.91 an ounce. Copper gained 1% to $2.65 a pound.
The dollar rose to 108.44 yen from 108.42 yen. The euro strengthened to $1.1273 from $1.1228.
