Gains in shares of manufacturers and financial firms pushed the Dow Jones Industrial Average and S&P 500 near fresh records Wednesday as investors continued monitoring the latest updates on global trade policy.
Major indexes rose a day earlier alongside commodities and other risk assets after analysts said new tariffs announced by the U.S. and China were less stringent than previously anticipated.
Anxiety over an escalating U.S.-China trade conflict and uncertainty about U.S. trade relationships with Canada and the European Union have hung over global markets lately, but some investors expect compromises to eventually quell fears of a growth-hindering trade war.
Despite the recently announced tariffs, renewed faith in global economic stability could support the market heading into third-quarter earnings season, some analysts said. A pickup in other parts of the world could support multinational companies, with the U.S. already growing at its quickest pace in years.
“The follow through, while it is real, does not seem like it will be a long-lasting situation,” said Eric Aanes, president and founder of Titus Wealth Management. “The economy is driving the market, and not so much the political situation.”
The blue-chip index added 159 points, or 0.6%, to 26406, pulling within 1% of its January record. The S&P 500 added 0.1%, while the tech-heavy Nasdaq Composite edged down 0.1%.
The S&P 500 was about 0.2% off its Aug. 29 record, while the Nasdaq was about 2% from its all-time high from last month.
While U.S. stocks have outperformed global indexes and commodities more sensitive to economic growth in other parts of the world, Asian stocks and materials also continued to rebound Wednesday.
Analysts said comments from Chinese Premier Li Keqiang regarding trade and China’s ability to stabilize domestic growth added to the positive sentiment at a World Economic Forum event Wednesday.
Investors were also monitoring talks between the U.S. and Canada, with Canadian Foreign Minister Chrystia Freeland meeting U.S. Trade Representative Robert Lighthizer on Wednesday.
Shares of manufacturers and commodity producers that have fallen so far this year amid trade threats extended a recent rally. Caterpillar added 2.5%, boosting the Dow industrials, while Ford rose 2.1%. Copper-mining company Freeport-McMoRan also climbed 2.1%.
Analysts have said recent retreats in the dollar and U.S. Treasurys, preferred haven assets for investors recently, also reflect renewed confidence that trade fights won’t cripple global economic growth. On Wednesday, the WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, fell 0.2%.
The yield on the 10-year U.S. Treasury note climbed to 3.081% from 3.048%—its highest close since late May. Yields rise as bond prices fall.
Investors are increasingly expecting the Federal Reserve to raise interest rates at its meeting next week and again in December, CME Group data show, and some analysts will also be eyeing the central bank’s projected path for 2019.
The recent rise in Treasury yields has lifted bank stocks, as higher yields tend to support lending profitability. The S&P 500 financials sector rose 1.8% Wednesday, while JPMorgan Chase, Goldman Sachs and Bank of America all added at least 2.5%.
Elsewhere, the Stoxx Europe 600 edged up 0.3%, as gains in mining and financial stocks offset losses in utility and real-estate shares.
Most indexes in the Asia-Pacific region rose. The Shanghai Composite Index and Hong Kong’s Hang Seng each added more than 1%, trimming some of their sizable year-to-date losses.
Japan’s Nikkei Stock Average rose 1.1% Wednesday after the Bank of Japan kept its ultra-easy monetary policy unchanged.
Investors sold stocks in anticipation of the Trump administration’s latest wave of tariffs. But U.S. equities bounced back after the measures were announced. Photo: Michael Nagle/Bloomberg News
“We think we’re in a period of improving risk appetite,” said Gene Frieda, global strategist at Pacific Investment Management Co. But “we see that as more tactical—we don’t see that as a trend.”
Mr. Frieda highlighted reasons to remain cautious, including U.S. financial conditions being near their tightest levels since 2009 and uncertainty over the trajectory of Chinese growth.
“On the trade side, we’d like to see some evidence we’re getting closer to deals,” he said, adding that he expects some progress between the U.S. and China in the run-up to the Group of 20 meeting in November.