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U.S. stocks rose modestly in early trading on Thursday, buoyed by hopes the U.S. and its European counterparts could move to ease trade tensions.
Investors were also looking ahead to the latest commentary from the Federal Reserve, which could provide clarity into the U.S. central bank’s thoughts on trade policy, and whether the issue is influencing strategy.
What are markets doing?
The Dow Jones Industrial Average rose 140 points, or 0.6%, to 24,310. The S&P 500 added 13 points to 2,726, a gain of 0.5%. The Nasdaq Composite Index rose 43 points, or 0.6%, to 7,546.
The day’s gains were broad, with 10 of the 11 primary S&P 500 sectors higher. Technology shares were among the biggest gainers, with the industry up 0.6%, while material stocks rose 0.4%.
Despite the widespread advance, major indexes were off their highs of the session, with many industries retreating from intraday peaks hit early in the session. Trading was also lighter than normal, with many market participants still out for the Fourth of July holiday, for which U.S. markets were closed on Wednesday.
What is driving the market?
Global trade tensions may have taken a positive turn on Thursday, with auto makers climbing after a U.S. official reportedly offered a “zero solution” to car tariffs. Such a deal would see the U.S. stop its threats to impose such duties in exchange for the European Union eliminating its levies.
Fiat Chrysler Automobiles NV jumped 5.2%, Ford Motor Co. added 0.8% and General Motors Co. rose 1.6%.
A day earlier, reports said the EU may try to broker talks between big auto producing countries to prevent tariffs from being hiked in an all-out trade war.
But if there was hope on the European front, trade tensions remained elsewhere. On Friday, the U.S. plans to impose $34 billion worth of duties on Chinese products, and Beijing is expected to implement its own retaliatory tariffs the same day — though not before the U.S. puts theirs into effect. There is a 12-hour time difference between Beijing and Washington.
China officials also cautioned that U.S. tariffs may backfire, because it could potentially harm American-owned enterprises that Trump intends to help.
What are market analysts saying?
“Markets are trading on headlines, but we’re reluctant to draw policy conclusions from posturing or headlines. So far we haven’t seen sufficient detail from the proposals that have been announced, and we don’t know enough to conclude whether a successful outcome is likely, or whether trade is an issue that may soon be in the past,” said Eric Wiegand, senior portfolio manager at U.S. Bank Wealth Management.
“But from a fundamental standpoint, we continue to be constructive on U.S. equity prices. They remain attractive, and that strength has allowed markets to move laterally higher despite the harsh geopolitical tone out there.”
What’s on the economic calendar?
The private sector added 177,000 jobs in June, according to the ADP employment report. This was below the 190,000 that had been forecast by analysts. Separately, initial jobless claims rose by 3,000 in the latest week, above what analysts had expected, although they remained near multidecade lows.
The final Markit services purchasing managers index for June came in at 56.5, compared with 56.8 in May. The Institute for Supply Management’s nonmanufacturing index for the same month came in at 59.1 from the previous month’s reading of 58.6.
An extended summary of the Federal Open Market Committee’s June meeting is due at 2 p.m. Eastern. Investors are hoping to get a better idea of what the Fed’s thoughts are on current disputes over trade, including whether any alarm on their part could put rate increases on hold until the trade situation calms down.
Which stocks are in focus?
Financial stocks were showing some signs of a rebound after Tuesday’s pullback. Shares of JPMorgan Chase & Co. rose 1%, while U.S.-listed shares of European banks also climbed. Deutsche Bank AG rose 4%, while Spain’s BBVA SA and Banco Santander SA both rose about 4%.
U.S.-listed shares of Praxair Inc. advanced 2.9% after the industrial gases company said it would sell the bulk of its European gases business to Taiyo Nippon Sanso Corp.
Boeing Co. fell 0.5% after it announced a partnership with Embraer S.A. to help both companies accelerate growth in the aerospace market. Boeing’s stake in the joint venture was valued at $3.8 billion.
Zebra Technologies Corp. agreed to buy Xplore Technologies Corp. in a deal that values it at a 48% premium. Shares of Xplore surged 47% while Zebra rose 0.2%.
Zynerba Pharmaceuticals Inc. tumbled 13% after it said an early-stage trial of a cannabinoid skin patch failed to meet its main goals.
Micron Technology Inc. said a recently announced injunction against some of its products being sold in China could reduce its fourth-quarter sales by 1%. Separately, a Stifel Nicolaus analyst said recent losses in the chip maker’s stock could represent a buying opportunity. Shares rose 1.7% and provided a lift to the overall semiconductor sector, which rose 1.4%.
Among other chip makers, Nvidia Corp. rose 0.9% and Advanced Micro Devices rose 2%.
What are other markets doing?
Asian stock markets closed mostly lower, with the tech-heavy China Shenzhen ChiNext Composite tumbling 2.2%. Equities in Europe traded higher, with the Stoxx Europe 600 index up 0.6%.