The S&P 500 clinched its second-highest close in history Friday, while the Dow Jones Industrial Average finished less than 1.5% below its record close following encouraging signs in corporate earnings and reports that the U.S. and China were close to completing some sections of a recently agreed trade deal.
How are major indexes faring?
The S&P 500 index SPX, +0.41% added 12.26 points, or 0.4% to close at 3,022.55, just 0.1% away from its record close of 3,025.86 on July 26, 2019. The Dow Jones Industrial Average DJIA, +0.57% gained 152.53 points at 26,958.06, a gain of 0.6% and only 1.5% off its all-time closing high of 27,359.16, also set in July. The Nasdaq Composite Index COMP, +0.70% closed 57.32 points higher or 0.7% at 8,243.12.
What’s driving the market?
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said on Friday they have made progress on the first phase of a potential U.S.-China trade detente, which helped lift the stock market higher Friday.
“The price action today is due to expectations of a trade deal with China that may in fact take the December 15 tariffs off the table -- a key Chinese demand,” Alicia Levine, chief strategist, BNY Mellon Investment Management, told MarketWatch.
“Right now this is improving market sentiment, but if the Dec. 15 tariffs remain, 2020 earnings estimates are at risk.”
Corporate earnings results have been a catalysts for stocks this week, with earnings from bellwethers Intel Corp. and Amazon.com Inc. in focus Friday.
More than 38% of S&P 500 companies posted quarter earnings for the third quarter thus far, according to FactSet. Of those companies, 78% have beat analyst expectations.
See: Intel stock shoots higher but one key number has analysts worried
Kristina Hooper, chief global market strategist at Invesco, said that progress on trade, upbeat earnings and expectations of another Federal Reserve interest rate cut next week were all key drivers of the stock market rally.
“That makes a very powerful trifecta,” she told MarketWatch. “And the good news is that investors are not letting a few high-profile earnings misses dictate their assessment about the facts in general.”
See: Amazon earnings miss is the price of growth, analysts say
Investors were also keeping an eye on Europe after French President Emmanuel Macron blocked the EU’s attempt to delay Brexit for three months, but the European Commission said work on this would “continue in the coming days”.
While the U.S. and China have made progress in trade talks and come close to completing parts of a phase one deal, doubts remain that a substantive U.S.-China trade agreement can be completed.Top U.S. and Chinese trade officials are discussing plans on Friday for China to buy more U.S. farm products, but in return, Beijing will request cancellation of some planned and existing U.S. tariffs on Chinese imports, people briefed on the talks told Reuters.
In U.S. economic news, the University of Michigan’s consumer sentiment index fell to 95.5 in October, from an initial reading of 96.0.
The U.S. government ran a budget deficit of just under $1 trillion — $984 billion — in the fiscal year that ended in September. It was the largest shortfall since 2012, and was 26% more than the fiscal 2018 deficit of $779 billion. As a percentage of gross domestic product, the deficit was 4.6%, up from 3.8% in fiscal 2018.
Which stocks were in focus?
Intel Corp. INTC, +8.10% shares gained 8% after the chip maker raised its outlook for the year on Thursday evening after it posted an increase in third-quarter earnings.
Amazon.com Inc. AMZN, -1.09% shed 1% on Friday after the tech giant reported a 26% fall in profit late Thursday as it invested heavily to speed up shipping times.
Verizon Communications Inc. VZ, -0.35% stock fell slightly despite an earlier gain after an earnings beat. The telecommunications giant added new phone subscribers and net income attributable to Verizon was $5.19 billion, up from $4.92 billion a year earlier. Quarterly revenue edged up slightly to $32.9 billion from $32.6 billion a year ago.
Boeing Co.’s BA, -1.37% 737 MAX was blamed formally in the Lion Air fatal nose dive into the Java Sea nearly a year ago by Indonesia investigators.
How did other markets perform?
Treasury yields rose for a second day on the upbeat tone on U.S.-China trade and as investors focused on next week’s Federal Reserve meeting, where another quarter point rate cut is expected. The 10-year Treasury note yield TMUBMUSD10Y, +1.60% added 3.7 basis points at 1.805%, putting yields on the benchmark note higher in two of the past three weeks, according to Dow Jones Market Data.
Oil futures drifted higher Friday, ending the week with a modest gain as worries over global economic growth and the outlook for crude demand eased.
Gold futures held above the key $1,500 level on Friday, but still short of a fresh near-term settlement high as investors positioned for more easing from global central banks, which could add further support for bullion.
European stocks ended higher on Friday. After closing Thursday at its highest level since Jan. 29, 2018, the Stoxx Europe 600 SXXP, +0.16% gained 0.16% to 398.01.
In Asia, Japan’s Nikkei NIK, +0.22% was up 0.22% after Trade Minister Isshu Sugawara resigned after just a month on the job.
Hong Kong’s Hang Seng Index HSI, -0.49% fell 0.49%, while the Shanghai Composite SHCOMP, +0.48% gained 0.48% and the smaller-cap Shenzhen Composite 399106, +0.99% rose slightly.