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By David Hodari and Akane Otani 

U.S. stocks jumped Tuesday as investors weighed signs of progress in trade talks between Washington and Beijing.

The Dow Jones Industrial Average climbed 186 points, or 0.8%, to 24607. The S&P 500 rose 1% and the Nasdaq Composite added 1.1%.

U.S. stocks have been under pressure for much of the fourth quarter as investors have worried about the fate of the U.S. and China's trade negotiations, which appeared to be deteriorating weeks ago.

But recent indications that Chinese officials could be open to amending a policy aimed at boosting firms' dominance in artificial intelligence and robotics--a key area of contention for the U.S.--helped boost optimism among investors. Stock futures also rallied earlier in the day after President Trump said on Twitter that "very productive conversations" were happening.

Companies that have become barometers for investors' sentiment around trade talks rallied, with Caterpillar and Deere adding more than 1% apiece.

Auto stocks also pushed higher, helped by reports that China's cabinet was considering proposals to cut tariffs on U.S.-made cars. Ford shares rose 1.7%, while General Motors advanced 3.3%.

Still, signs of caution remained. Apple shares missed out on the broader rally, trading around the flatline as the company tried to get a Chinese court to reconsider its decision to ban sales of older iPhones in China.

The court ruling added another source of friction in the trade skirmish between the world's two largest economies, as did the recent arrest in Canada of Huawei Technologies Co. Chief Financial Officer Meng Wanzhou on behalf of U.S. authorities. Ms. Meng is accused of lying to banks about Huawei's ties to a company that violated U.S. sanctions on Iranian business.

Between lingering trade tensions and signs of slowing growth around the world, many investors say they are heading into 2019 with muted expectations. BlackRock cautioned in its annual investment outlook that negative returns across both stocks and bonds--a relatively rare phenomenon--could become more common as the bull market ages.

Elsewhere, the Stoxx Europe 600 rose 2.1%, reversing course after U.K. Prime Minister Theresa May's postponement of a crucial Brexit vote in parliament Monday sent shares sliding. Ms. May's shock decision to pull the vote further diminished many investors' willingness to bet on U.K. assets, some said.

"If you're a macro investor, you're going to get blown out of the water by events like yesterday's," said John Wraith, head of U.K. rates strategy at UBS. "It makes investors incapable of trading those markets with any conviction whatsoever, so you see a lot of fund managers staying neutral and keeping their exposure to a minimum."

Shares in Asia were mixed, with India's Nifty 50 index slumping 1.9% after the governor of its central bank unexpectedly resigned from his post.

Central banking policy was also a subject of focus in the U.S., where data showed producer prices--another gauge of inflation--rising for the third consecutive month.

Investors and analysts widely expect the Federal Reserve to raise short-term interest rates when it meets next week, with CME Group data suggesting the market is pricing in a 78% probability of a rate hike.

Any forward guidance out of the Fed will be closely scrutinized, especially since some investors believe Chairman Jerome Powell has conveyed mixed messages over recent months. Mr. Powell jolted markets after suggesting rates weren't close to neutral and then subsequently appearing to backtrack on those remarks.

"I think he got a bit ahead of himself saying that we're not close to neutral," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management. "I think that was language we weren't prepared for and it helped tip the market. Now I think you'll see his language more focused on gradual patience."

Write to David Hodari at David.Hodari@dowjones.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

December 11, 2018 11:05 ET (16:05 GMT)

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