By Avantika Chilkoti and Michael Wursthorn 

Shares of retail giant Walmart pulled the Dow Jones Industrial Average higher Tuesday, helping the blue-chip index extend its recent rally.

Investors got a much-needed dose of retail optimism after Walmart reported better-than-expected sales and profit in the fourth quarter, fueled by strong grocery sales, online orders and holiday purchases. Shares of Walmart led the Dow industrials Tuesday and nudged higher shares of dozens of other consumer-staple companies in the S&P 500.

The earnings served as further evidence that the U.S. economy remains on solid footing and helped allay some of investors' concerns that holiday shopping was significantly weaker than expected . Data from the Commerce Department last week said December sales saw their largest drop since 2009.

"Walmart was surprisingly good in terms of their holiday results," said Thomas Wright, director of equities at JMP Securities, adding that most of the earnings from the fourth quarter were better than expected.

The Dow industrials added 33 points, or 0.1%, to 25915, after rising for eight consecutive weeks. The S&P 500 rose 0.2%. The Nasdaq was recently up 0.3%.

Consumer-staple stocks rose 0.8%, the most of any other S&P 500 sector, with shares of Walmart rising 3.7%

But while several money managers cheered Walmart's results, most said they are more concerned with how the latest round of trade negotiations between the U.S. and China plays out this week.

Signs of optimism around the trade talks have fueled the latest leg of the stock market's recovery following last year's selloff. President Trump and other officials last week described the latest round of negotiations as productive, helping the Dow industrials and the Nasdaq Composite clinch their eighth straight week of gains -- their best winning streaks since 2009.

This week, negotiators are focused on narrowing the still-substantial gap between the concessions China is willing to offer and what the Trump administration will accept. With all three major indexes up 10% or more this year, some investors say there's a strong likelihood of a quick reversal if both sides fail to reach a breakthrough that would avoid an escalation in tariffs on Chinese imports slated for March 1.

"It feels to me the economic and political news has just got worse," said Neil Dwane, global strategist at Allianz Global Investors. "It is all the sentiment around trade that has helped the market rally on the basis that everyone believes there won't be an all-out trade war."

Market optimism has also been driven largely by the "dramatic" U-turn in commentary from the U.S. Federal Reserve in recent months toward less aggressive policy tightening, according to James Athey, a senior investment manager at Aberdeen Asset Management. The central bank's shift has come "without any real difference in the economy relative to their forecasts," he said.

"It's not about trade policy, it's not about positive sentiment per se," Mr. Athey said. "The reality is that equity markets have been underwritten by the Fed's comments."

Minutes from the Federal Reserve's January meeting are expected Wednesday. Investors will scrutinize them for details on the Fed's views on growth and any further move away from a previous bias toward tighter monetary policy.

Mr. Athey, like many investors, expects decision makers at the central bank to maintain their dovish stance, whatever the outlook for the U.S. economy.

"They are not data-dependant at all," Mr. Athey said. "It's a forced pause driven by market conditions."

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

February 19, 2019 13:33 ET (18:33 GMT)

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