By Avantika Chilkoti and Michael Wursthorn
The Dow Jones Industrial Average climbed more than 300 points Tuesday as optimism that U.S. and Chinese negotiators were making progress toward a broad outline of a trade agreement eased some of investors' trepidations.
Shares of everything from industrial manufacturers to technology giants rose, as investors used the potential for a trade deal and an agreement in principle among U.S. lawmakers to avoid a partial government shutdown as a reason to push the Dow industrials and other major indexes toward their biggest daily gains of the month.
Whether the gains hold largely depends on the outcome of those trade talks later this week and how likely it appears that U.S. and Chinese officials will reach a deal before the March 1 deadline, money managers said. If the two sides don't reach an agreement by then or agree to extend the deadline, tariffs on $200 billion of Chinese goods will rise to 25% the following day from 10%.
"The rally you see now indicates the market thinks there's progress" toward a deal, said Abe Sheikh, chief investment officer of Cougar Global Investments. "But if there isn't progress, there will be shocks felt through the market."
So far, midlevel officials have been meeting this week to narrow the gap between concessions China is willing to offer and what the Trump administration will accept. A higher-level delegation led by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin is scheduled to meet with Chinese representatives later this week.
Still, a final outcome on trade appeared far from certain. A meeting date between President Trump and Chinese President Xi Jinping hasn't been set. And when asked about the prospects of a trade deal on Tuesday, Mr. Trump said, "We'll see what happens," adding that he believed China wanted to reach an agreement.
Investor sentiment also was buoyed by a deal among lawmakers late Monday to avoid another partial government shutdown this week. The deal would provide $1.38 billion of funding for 55 miles of modern physical barriers along the border with Mexico, below Mr. Trump's initial demands.
The Dow industrials were up 339 points, or 1.4%, to 25392 in recent trading, while the S&P 500 added 1.2% and the Nasdaq Composite gained 1.3%.
Ten of the 11 major sectors in the S&P 500 notched gains in recent trading, with communications, industrial, technology, consumer discretionary and material stocks all rising more than 1%.
While the gains were broad, corporate news drove some of the market's biggest moves. Shares of Coty, for example, rose 14% after JAB Holdings said it would buy up to $1.75 billion of shares in the beauty-product company.
Brighthouse Financial added 13% after reporting earnings that topped analysts' expectations late Monday afternoon.
Real-estate stocks, meanwhile, slid 0.7%, slightly denting the S&P 500's gains Tuesday.
Elsewhere, the Stoxx Europe 600 was up 0.5% after data showed the U.K. economy grew at its slowest pace in six years in 2018 as the protracted Brexit negotiations weigh on investment.
Asian markets also were higher, led by Japan's Nikkei, which gained 2.6%. Hong Kong's Hang Seng Index added 0.1% and the Shanghai Stock Exchange climbed 0.7%.
This week, investors will be watching closely as the latest U.S. economic data is published, including December retail-sales figures on Thursday and inflation figures on Wednesday. Economists surveyed by The Wall Street Journal expect inflation to have pulled back on an annual basis.
Continued concerns about when the U.S. economy will slow are "overly pessimistic," said David Slater, portfolio manager at London-based hedge fund Trium Capital, who said he sees the sharp drop in global equities in the last quarter of 2018 as one possible explanation for that market gloom.
"That, as a whole, would encourage cautious sentiment," Mr. Slater said.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
February 12, 2019 13:52 ET (18:52 GMT)
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