The Dow Jones Industrial Average rose on Thursday as investors awaited for more news on a potential trade deal between China and the U.S.
The 30-stock index traded 100 points higher, led by a 2.4% gain in Boeing. The other major indexes struggled, however, as the S&P 500 dipped 0.1% while the Nasdaq Composite fell 0.4%.
Boeing rose despite Ethiopia saying the company must review the “controllability” of its 737 Max 8 jet. This comes after an Ethiopian Airlines flight operated with a 737 Max 8 crashed last month.
The Wall Street Journal reported that Donald Trump expects to announce the date of a trade summit with Chinese leader Xi Jinping later in the day, lifting market sentiment. Trump is due to meet with Chinese Vice Premier Liu He at the White House on Thursday.
The U.S. and China have imposed tariffs on billions of dollars’ worth of one another’s goods over the past year, battering financial markets and souring business and consumer sentiment.
Matt Lloyd, chief investment strategist at Advisors Asset Management, expects some sort of trade deal to be reached. This will boost equity prices, but volatility will persist as key issues like intellectual property theft will likely not be fully solved.
“The trade deal is really two deals. First, you have the numbers, the tariffs and all that; that’s the easy fix. Intellectual property on the other side, that’s not going to be fixed right away. That’s going to take a few years, in my opinion,” said Lloyd.
Improvement in U.S.-China trade talks has boosted stocks to start off 2019. The S&P 500 is up more than 14% year to date, with technology stocks leading the way. A reversal in the Federal Reserve’s policy stance has also lifted equity prices.
The Fed signaled at is March meeting it would not raise rates at all in 2019, a sharp pivot from the central bank’s previous forecast of two rate hikes for the year. One key reason for the central bank’s change is deteriorating economic data.
On Wednesday, the ISM services index fell to its lowest level since August 2017. Meanwhile, a private payrolls report disappointed investors. The Citi U.S. Economic Surprise Index — which tracks how economic data fares against estimates — has also dropped to its lowest level since July 2017.
“The market is certainly climbing the proverbial wall of worry,” said Jeff Zipper, managing director of investments at U.S. Bank Private Wealth Management. “But that said, when you look at the internals in the domestic market … you’re seeing industrial metals outperform precious metals; you’re seeing consumer discretionary outperform consumer staples. That would lead investors to believe this market still has room to grow.”
“However, after such a strong first quarter, you might have some sort of reversion to the mean before we go higher,” Zipper said. “A lot of that will be based on what we see in earnings.”
Tesla shares dropped about 8% after the company said it delivered fewer-than-expected Model 3 cars in the first quarter. Facebook shares rose 1.5% after Guggenheim upgraded the social media company to buy from neutral, citing “stable” user trends and investors feeling more comfortable with the company’s privacy issues.
—CNBC’s Sam Meredith contributed to this report.