By Michael Wursthorn and Georgi Kantchev 

The Dow Jones Industrial Average is poised to close at a new high for the first time since Jan. 26 as investors' convictions in a booming U.S. economy helped them look past the latest trade sparring between the U.S. and China.

Nearly all 30 stocks in the Dow industrials rose Thursday, from the tech giants like Apple and Microsoft that have helped power the stock market to new highs to trade-sensitive stocks like Boeing and Caterpillar.

The broad gains also pushed up the S&P 500, which is on track to top its Aug. 29 record, while the Nasdaq Composite moved within 1.2% of its high set the same day.

The major indexes are rising alongside a recent jump in bond yields, a sign the market is shrugging off worries the Federal Reserve's pace of economic tightening could roil stocks. A strengthening U.S. economy has boosted sentiment, and several investors said the torrid pace of growth appears likely to outlive the trade tensions that have rocked stocks this year.

"The good economic news has put us into a bit of a momentum streak," said Larry Peruzzi, managing director of international equity trading at Mischler. "And with bond yields going higher, people are willing to take more risk and put more money into the equity side."

The Dow industrials climbed 252 points, or 1%, to 26658. The S&P 500 added 0.8%, and the Nasdaq Composite rose 0.9%.

The U.S. economy is on its strongest footing in years, with the rate of unemployment at its lowest level in nearly two decades and economic output growing at the fastest rate since 2014. The outlook got even rosier Thursday: Initial jobless claims, a proxy for layoffs across the U.S., fell to the lowest level since 1969, the Labor Department said.

Analysts credit the boom in U.S. growth to the tax overhaul passed last year. The changes, which included a cut to the corporate tax rate, sent corporate profits sharply higher through the first two quarters of the year, and analysts expect third-quarter earnings to be robust as well.

S&P 500 companies are projected to grow profits by 19% from a year earlier, according to FactSet, after already posting growth rates of 25% for the first two quarters of the year.

The expectation for strong profit growth is driving investors to continue buying shares of technology companies, a sector that includes some of the fastest-growing companies in the stock market, some money managers said. That helped push tech companies in the S&P 500 up 1.2% Thursday.

Shares of Apple added 1.3%, extending their gain for the year to 31%. Boeing and Caterpillar, which have both seen their stock prices sag under concerns of trade tensions, added 1.1% and 1.8%, respectively.

Energy companies Chevron and Exxon Mobil edged slightly lower, though, making them the only two stocks in the Dow industrials to fall in midday trading. Chevron dropped 0.2%, while Exxon slipped less than 0.1%.

While the strong economic growth has stoked stocks, bond prices have stumbled, sending yields higher. The 10-year yield, which sits at 3.068%, has climbed 0.245 percentage point in the past month and is on track to rise for a fourth consecutive week.

The jump in yields in September is the biggest since January. The two-year Treasury yield rose to 2.812%, the highest since June 2008. Investors increasingly expect quickening growth to give the Fed sufficient reason to continue with its quarterly pace of interest-rate increases through the first half of next year.

And the U.S. dollar fell to its lowest level in more than two months Thursday, in another sign that investors expect the U.S. to avoid a trade war with China and other countries. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, dropped 0.4% to 88.87, its lowest level since early August. The measure is off more than 2% from last month's highs.

A weaker dollar eases pressure on multinational corporations because it makes products cheaper to sell abroad, while boosting the value of overseas earnings that are translated back to U.S. dollars. It could also offer some relief to struggling emerging-market countries that service their debt in U.S. dollars. The WSJ Dollar Index is up nearly 3.5% this year.

Still, trade tensions continue to linger in the background and have the potential to knock stocks back if the U.S., China or other countries ratchet up their tactics. So far, investors are optimistic that trade tensions will eventually cool, especially after the U.S. said it would stagger its latest levies on Chinese imports.

"The fundamental backdrop continues to be very solid, but I won't be surprised to see more anxiousness in the market as trade continues to be an issue," said Eric Wiegand, senior portfolio manager at U.S. Bank Wealth Management. "Any headlines about dialogue between trading partners help sentiment."

But trade's impact on the global economy could be more acute since other regions of the world, including Europe and Asia, are seeing more sluggish growth compared with the U.S.

Citigroup said in a report to clients that a worsening trade environment represents "a material risk to growth into 2019." The bank lowered its forecast for global growth this year to 3.3%, the first downward revision since October 2017, with the same rate expected next year.

Investors are looking to next week's Fed meeting, with most expecting the U.S. central bank to raise interest rates. The market currently sees a 94% chance of a rate rise at the meeting, according to Fed-fund futures tracked by CME Group. Traders were also eyeing the central bank's projected path for 2019.

In Asia, Japan's Nikkei Stock Average finished little changed, while Hong Kong's Hang Seng rose 0.3%.

--Daniel Kruger and Ira Iosebashvili contributed to this article.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

(END) Dow Jones Newswires

September 20, 2018 13:32 ET (17:32 GMT)

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