U.S. stocks started March on a positive note Friday with sentiment bolstered by news that trade negotiations between the U.S. and China may conclude as soon as in two weeks. However, the latest data on U.S. manufacturing disappointed, tempering investors’ optimism.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.43% gained 110 points, or 0.4%, to 26,026, while the S&P 500 index SPX, +0.69% rose 17 points, or 0.6%, to 2,801. The Nasdaq Composite Index COMP, +0.83% advanced 60 points, or 0.8%, to 7,593.
The S&P 500 and the Nasdaq are poised to rise for the week at their current pace while the Dow is hovering at break-even.
What’s driving the market?
Hope of an imminent conclusion to Sino-American trade negotiations in the next couple of weeks was among the factors sparking buying interest.
According to Bloomberg News, U.S. officials were preparing for a summit between President Donald Trump and Chinese leader Xi Jinping at which a 150-page agreement could be signed. However, during a news conference while abroad this week, Trump emphasized his willingness to walk away if a favorable trade deal couldn’t be struck.
Earlier this week, top trade negotiator Robert Lighthizer said that tariffs on $200 billion in Chinese goods set to increase to $25% from 10% at 12:01 a.m. March 2, wouldn’t go into effect.
In the U.K., the opposition Labour Party has confirmed it would support a second referendum on membership of the European Union, while Prime Minister Theresa May has agreed to allow Parliament to delay Brexit, which many analysts say raises the chances that the nation’s withdrawal from the bloc will be put off past the March deadline.
What data are in focus?
The Institute for Supply Management’s manufacturing index fell to 54.2% in February, below economists’ expectations of 55.5%, according to a MarketWatch poll. It also marked the slowest pace of growth since the election of President Trump in November 2016
Markit’s manufacturing PMI also disappointed, coming in at 53.0 in February, after hitting 53.7 in January.
The Commerce Department reported that the PCE inflation index rose 0.1% in December, compared with the 0.4% increase in November, above economists estimates of a 0.4% decline, according to a MarketWatch poll. The 12-month change in prices remained steady at 1.9%.
Consumer sentiment came in below economists’ expectations, with the University of Michigan’s index came in at 93.8, versus expectations of 95.6, per a MarketWatch survey of economists.
Meanwhile, Atlanta Fed President Raphael Bostic, speaking at the National Association for Business Economics conference in Washington, D.C., said he still expects the central bank to raise interest rates once this year as inflation picks up.
What are strategists saying?
“Both of the US manufacturing PMIs dramatically undershot expectations,” Connor Campbell, financial analyst with SpreadEx, wrote in a note. “Granted, these numbers are a lot better than what was posted by the UK, China and the eurozone – the latter 2 regions saw their respective manufacturing sectors stuck in contraction territory – earlier in the day, but they are nevertheless cause for concern,” he added.
It was these disappointing figures that helped put pressure on stocks earlier, causing them to fall “well off the 170 point rise suggested by the futures before the PMIs were released,” he wrote.
David Madden, a market analyst at CMC Markets UK, credited Friday’s gains to fading trade worries. The bilateral trade agreement is not a certainty, he said, but investor know that the U.S. and China are headed in the right direction.
Which stocks are in focus?
Shares of Gap Inc. GPS, +16.22% jumped 17% after the giant clothing retailer said it was splitting into two publicly trade companies and closing some 200 stores.
Foot Locker Inc. FL, +5.96% shares rallied 5.6% after the sporting goods and apparel retailer blew past earnings estimates for its fiscal fourth quarter.
Shares of Immunogen Inc. IMGN, -46.93% sank 47% after the company said a phase 3 trial of its ovarian cancer treatment, mirvetuximab soravtansine, failed to meet its primary endpoint of progression free survival.
Shares of Tesla Inc. TSLA, -7.88% skidded 7.4% after the electric-car manufacturer announced Thursday evening that it is likely to report a loss in the fourth quarter, contrary to previous predictions. Tesla also announced that it would offer its Model 3 for $35,000, while saying it would lay off employees to cut costs.
Dentsply Sirona Inc. XRAY, +17.67% shares surged 17% after the maker of dental products and technologies beat analyst estimates for fourth-quarter earnings and sales.
Dow component Walgreens Boots Alliance Inc. WBA, -6.46% dropped 7% after the drugstore chain said it continues to face reimbursement headwinds, as well as pressure from falling prices for generic drugs.
How are other markets trading?
Stocks in Asia rose on trade optimism with Japan’s Nikkei 225 NIK, +1.02% Hong Kong’s Hang Seng Index HSI, +0.63% and China’s Shanghai Composite Index SHCOMP, +1.80% all finishing higher.
In Europe, stocks closed higher with the Stoxx Europe 600 SXXP, +0.39% rising 0.4%.
In commodities markets, the price of oil CLJ9, -2.55% fell, while gold prices GCJ9, -1.83% settled weaker and the U.S. dollar DXY, +0.26% rose against its peers.
—Mark DeCambre contributed to this report
Providing critical information for the U.S. trading day. Subscribe to MarketWatch's free Need to Know newsletter. Sign up here.