Stocks vaulted higher Thursday, with the Dow rising by triple digits after upbeat earnings from two blue chips, as investors weighed the latest developments on the trade front after President Donald Trump appeared to target China telecommunications group Huawei Technologies Co. with an emergency declaration against threats to U.S. technology.
Meanwhile, economic data on the U.S. labor and housing markets came in better than expected, offsetting worries over trade.
How are major indexes faring?
The Dow Jones Industrial Average DJIA, +0.97% rallied 286 points, or 1.1%, to 25,934 and the S&P 500 index SPX, +1.11% climbed 37 points, or 1.3%, to 2,889. The Nasdaq Composite Index COMP, +1.13% rose 115 points, or 1.5%, to 7,937.
The S&P 500 and Nasdaq have bounced back over the past three sessions to erase the ground lost in a Monday rout triggered by an escalation of the U.S.-China tariff battle. Both indexes are now slightly positive on the week, while the Dow has trimmed its weekly decline to almost break even.
What is driving the market?
Global equities have proven resilient after the Trump administration fired a fresh salvo in a trade spat with China late Wednesday, issuing an executive order that bans telecom equipment from countries considered “foreign adversaries”. The move appeared to target Huawei, which has been under pressure from the White House for months.
Additionally, the Commerce Department said that it would add Huawei to a list of entities that engage in “activities contrary to U.S. national security and/or foreign policy interests,” which could greatly restrict its purchases of crucial American-made chips.
Other corners of the Trump administration were offering reasons for markets to hope that a U.S.-China trade deal of some sort was still in the offing. Treasury Secretary Steven Mnuchin said Wednesday that the U.S. officials would “most likely” meet with Chinese delegates again in Beijing after each side fired off trade tariffs at the other.
A spokesman for China’s Commerce Ministry said the country opposes other countries imposing unilateral sanctions on Chinese entities and that Washington should avoid actions that adversely affect Sino-U.S. relations, Reuters reported. The spokesman also said he had no information on plans for a U.S. trade delegation to visit China.
On the economic front, the number of Americans applying for jobless benefits fell by 16,000 in the week ended May 11, to 212,000, the Labor Department said. That’s below the 217,000 expected by economists polled by MarketWatch.
Construction of new homes rose 6% in April from the month earlier to an annual rate of 1.24 million, above the 1.21 million pace expected by economists, per a MarketWatch poll.
The Philadelphia Fed’s manufacturing index rose to a four-month high in May, reaching 16.6, after registering 8.5 in April.
What are analysts saying?
“I’m rather surprised and impressed by the resiliency of the equity market and other risk assets in the face with all this uncertainty, which goes beyond trade,” said Jim Solloway, chief investment strategist at SEI Investments.
“People are beginning to place trade in more perspective,” he said. “To be sure, nobody wins from a trade war, but when you look at the numbers, we’re still talking about a relatively small amount of tariffs in the context of a $21 trillion economy, so what we’ve seen to date isn’t as important as the general direction of global growth.”
Overall, data on the global economy has shown marginal improvements in recent weeks, which has helped to buoy investor confidence, he added.
“It’s hard to keep up with the Trump White House at the moment. After the damaging trade war escalation that dominated either side of the weekend, the markets were granted a reprieve on Wednesday as reports came out suggesting the US was prepared to delay tariffs on cars from Europe and Japan,” wrote Connor Campbell, financial analyst at SpreadEx, in a note.
“And then the president zigged when it looked like he was zagging, declaring a national emergency to protect US computer networks from ‘foreign adversaries’—i.e. a big middle finger to China via an attack on Huawei. The latter, alongside 70 of its affiliates, is now on the Entity List, meaning it will require official US government approval to buy crucial parts and components from American companies.”
Which stocks are in focus?
Dow component Walmart Inc. WMT, +2.03% shares rose 2.6% after the retailer reported better-than-expected earnings for the first quarter, though revenue fell short of analyst forecasts. U.S. same-store sales rose 3.4%, beating an expected 3.2% increase, according to FactSet.
Shares of fellow Dow constituent Cisco Systems Inc. CSCO, +7.15% rallied 6.9% after the networking- and telecom-equipment company reported quarterly results that topped Wall Street forecasts and delivered an upbeat revenue forecast.
Shares of Jack in the Box Inc. JACK, +1.80% gained 4.4% after the fast food company said it plans to replace its existing credit facility with securitization and then resume buying its shares in the open market. Jack in the Box also reaffirmed its long-term guidance, projecting sales of about $4 billion in fiscal 2022.
How are other markets trading?
Asian markets had a mixed session, with a 1.2% drop for Korea’s Kospi SEU, -1.20% and a 0.6% gain for the Shanghai Composite SHCOMP, +0.58% In Europe, stocks advanced, with the Stoxx Europe 600 SXXP, +1.27% rising 1%
—Barbara Kollmeyer contributed to this report
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