U.S. stocks closed higher Thursday, with both the Dow Jones Industrial Average and the S&P 500 setting records, as strong economic data helped to alleviate concerns over escalating U.S.-China trade tensions. Blue chips helped to fuel the rally, with all but two of the Dow’s 30 components finishing in positive territory.
How did major benchmarks fare?
The Dow DJIA, >-0.68% gained 251.22 points, or 1%, to 26,656, hitting a record for the first time since January. The S&P SPX, >-0.35% advanced 22.80 points, or 0.8%, to 2,930.75, notching its first record since late August.
The Nasdaq Composite Index COMP, >+0.08% rose 78.19 points, or 1%, to 8,028.23. The tech-heavy index moved within 1.3% of its all-time high set last month.
What drove the market?
Recent market gains have come on signs of steadily improving fundamentals. In the latest economic data, first-time jobless claims fell by 3,000 last week, dropping to their lowest level since November 1969. Separately, the Philadelphia Fed manufacturing index jumped more than expected in September, rising to 22.9 from 11.9 in the previous month.
Existing-home sales ran at a seasonally adjusted annual 5.34 million rate in August, virtually unchanged compared with July. The nine-year-old U.S. expansion is poised for 3% growth in the second half of 2018, according to an index that measures the nation’s economic health.
Such reports have helped to offset some of the adverse impact of uncertainty surrounding trade policy.
Among recent developments, President Donald Trump earlier this week reiterated his hard-line stance on China and said the U.S. had “no choice” but to levy another $267 billion in duties on China. That would come on top of announced tariffs on about $200 billion in Chinese goods announced late Monday. China responded with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24, and said it may introduce more measures if the U.S. goes ahead with higher tariffs.
While many are concerned that a full-blown trade war will become a huge headwind to global economic growth, investors have repeatedly shrugged off the issue over the past several months, choosing instead to focus on the strong economy.
Separately, many prominent Wall Street players have played down the impact that the trade issue is having on the economy. Jamie Dimon, the chief executive officer of JPMorgan Chase & Co. JPM, >-0.96% , said the U.S. wasn’t in a trade war, but “a trade skirmish” of less severity.
Trump on Thursday also tweeted over his displeasure with the Organization of the Petroleum Exporting Countries, or OPEC, over rising oil prices.
What were analysts saying?
The market’s resilience, and to some extent investors’ complacency to mounting trade friction, isn’t necessarily a positive development, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
“The end result is an ever-growing threat to the world economy — and to markets — that may be ignored until it is too late, especially because the imminent threat seems less than expected and markets haven’t sold off. For that reason, I believe caution is warranted and I would take this rally with a grain of salt. I don’t think we can blow the all-clear sign until steps are in place to resolve trade concerns with China, which are now more of a threat than ever,” he said in a note.
“Fundamentally and technically, the market is really strong right now. Corporate earnings have been good, and economic data has been really good. At the same time, there’s a sense that China’s most recent trade retaliation wasn’t as severe as expected, which led to some optimism and relief that the situation may not turn into a full-blown trade war,” said Paul Brigandi, managing director and head of trading for Direxion.
“The tariff situation isn’t going away, and it will need to be resolved, but until threats become official policy, the market can ignore it,” he said. “Certainly, what we’ve seen so far hasn’t been able to knock the momentum out of the market.”
What stocks were in focus?
Shares of Canadian cannabis company
Tilray Inc. TLRY, >-19.11% fell 18% following an extremely volatile patch of trading, which resulted in it being halted five times in less than an hour Wednesday. The stock has jumped nearly 600% over the course of the past month, making it one of the most high-profile bets in the legal cannabis space.
Rio Tinto RIO, >-0.19% rose 3.8% after the mining giant unveiled plans to buy back a swath of its Australia-listed shares before the end of the year as part of its move to return about $3.2 billion in proceeds from the sale of coal assets to its shareholders.
What were other markets doing?
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