Optimism over U.S.-China trade talks boosts stocks again

Stocks finished broadly higher Wednesday as investors remained optimistic that the U.S. and China will make more progress in resolving their costly trade dispute.

Energy companies, retailers and industrial stocks accounted for much of the broad gains as the market extended its winning streak to a fourth day.

Key officials from the world’s two largest economies will meet Thursday and Friday to try and stave off an escalation of a trade conflict that has hurt companies and consumers by raising prices on a number of products. President Donald Trump has said he might let a March 2 deadline slide if the U.S. and China get close to a deal.

After March 2, additional tariffs are scheduled to kick in, making the situation worse. Economists and analysts are optimistic that both sides will eventually hammer out an agreement that satisfies U.S. complaints that China steals or pressures U.S. companies to hand over technology.

“The president’s seemingly positive tone regarding trade has helped underpin the market, particularly the industrial names,” said Quincy Krosby, chief market strategist at Prudential Financial. “That’s a positive catalyst for the market.”

The S&P 500 index gained 8.30 points, or 0.3 percent, to 2,753.03. The Dow Jones Industrial Average climbed 117.51 points, or 0.5 percent, to 25,543.27. The Nasdaq composite added 5.76 points, or 0.1 percent, to 7,420.38. The Russell 2000 index of smaller-company stocks, which has been leading the other indexes this year, added 4.71 points, or 0.3 percent, to 1,542.94.

Major indexes in Europe also finished broadly higher, despite a report of slumping industrial output across the 19 countries that use the euro.

Companies on both sides of the U.S.-China dispute have been battered by Washington’s tariffs and retaliatory duties imposed by Beijing. The stakes are rising as global economic growth cools, which has contributed to a dimmer outlook for company earnings this year.

Still, the White House’s remarks about the trade talks this week have helped alleviate some uncertainty for the market.

“The momentum that we saw yesterday has certainly carried through today,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank.

The market briefly lost some of that momentum around midmorning Wednesday as U.S. Sen. Marco Rubio announced over Twitter plans to introduce a bill aimed at deterring companies from buying back their own stock. The Republican from Florida said the argument that stock buybacks free up money for companies to reinvest in growth “isn’t backed up by the facts.”

Rubio’s remarks come as corporate stock buybacks hit new highs last year, led by technology companies.

Buybacks, in which companies purchase their own shares and retire them, are popular with investors because fewer shares outstanding lifts earnings per share, the most watched barometer of corporate success.

The sweeping tax law passed by the GOP-led Congress in late 2017 gave companies an incentive to boost their stock prices.

Rubio’s bill would tax corporate share buybacks to the same degree as dividends, with the goal of giving “permanent preference to investments that will drive the creation of jobs and increase wages,” Rubio tweeted.

The prospect of such a bill appeared to ruffle the markets briefly, Krosby said.

“The fact is you have the senate controlled by the Republicans, so it’s hard to imagine you’re going to see a vote,” she said. “Maybe that’s why the market is still up.”

With U.S. companies nearing the end of a relatively strong earnings season, investors continued to evaluate the latest batch of quarterly results Wednesday.

Video game maker Activision Blizzard jumped 7 percent as it moved to lay off nearly 800 workers, in part to deal with a steep downturn in revenue following the best year in its history.

The maker of “Call of Duty” and “Candy Crush,” reported fourth-quarter 2018 revenue that fell short of analysts’ forecasts and said it expects revenue to decline about 20 percent this year. Activision is facing tougher competition, specifically from Epic Games’ “Fortnite”, which is siphoning away sales.

Higher room rates pushed hotel operator Hilton Worldwide to a strong fourth-quarter profit, beating analysts’ forecasts. The company also gave Wall Street a strong profit forecast for the current quarter. Hilton’s stock rose 6.8 percent and competitor Marriott International added 3.6 percent.

Groupon slumped 11.1 percent after the online daily deal service came up short of analysts’ profit forecasts for the quarter. Customer traffic in its key North America market fell, dragging down revenue.

TripAdvisor slid 5.7 percent after the travel website operator reported weaker-than-expected fourth-quarter profit and lower revenue from its key hotel bookings segment.

U.S. benchmark crude rose 1.5 percent to settle at $53.90 a barrel in New York. Brent crude, the standard for international oil prices, gained 1.9 percent to close at $63.61 a barrel in London.

The pickup in oil prices gave a boost to energy stocks. Exxon Mobil rose 1.1 percent.

Bond prices fell. The yield on the 10-year Treasury rose to 2.70 percent from 2.68 percent late Tuesday.

The dollar rose to 110.99 yen from 110.52 yen on Tuesday. The euro weakened to $1.1271 from $1.1331.

Gold added 0.1 percent to $1,315.10 an ounce. Silver slipped 0.2 percent to $15.65 an ounce. Copper was little changed at $2.77 a pound.

In other energy futures trading, wholesale gasoline added 2.7 percent to $1.47 a gallon. Heating oil climbed 1.7 percent to $1.94 a gallon. Natural gas dropped 4.2 percent to $2.58 per 1,000 cubic feet.