U.S. stocks rallied to close higher Thursday, with the Dow having its best day in four months, on strong corporate earnings from Walmart Inc. and Cisco Systems Inc. News that the U.S. and China are prepared to resume trade talks next week also bolstered investors’ sentiment.
How did the benchmarks fare?The Dow Jones Industrial Average DJIA, +1.58% jumped 396.32 points, or 1.6%, to 25,558.73. It was the blue-chip index’s strongest one-day performance since April 10, when it surged 429 points, or 1.8%, according to FactSet data.
The S&P 500 index SPX, +0.79% advanced 22.32 points, or 0.8%, to 2,840.69 with all its 11 sectors ending in positive territory, led by telecommunications services, consumer staples and financials. The Nasdaq Composite Index COMP, +0.42% added 32.41 points, or 0.4%, to 7,806.52.
Major indexes fell sharply Wednesday, though they ended off their lows of the session. The Dow closed at its lowest level since July 23, and both the Dow and the S&P 500 had dropped in five of the previous six sessions. The Nasdaq had declined in three of the past four trading days.
Read: The Dow just registered its longest stint in correction territory in nearly 60 years
What drove the market?In a potentially positive development, China will send a delegation to the U.S. later this month to resume trade talks, the first such meeting since July. The news comes at a period of elevated tensions between the two major trading partners who have been imposing tariffs on billions of dollars on each other’s goods over the past several months. The prospect of a trade war has intermittently pressured equities in recent months.
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Aside from elevated trade tensions, the market has been battered by the economic crisis in Turkey, which investors fear could spread to other regions or hurt European banks, many of which have exposure to the country.
The currency problem will likely continue to dictate market action in the short term, but there are signs that the situation has stabilized. On Wednesday, it was reported that Qatar would invest $15 billion in Turkey, which could provide something of a lifeline.
The Turkish lira TRYUSD, +2.9155% was on track for its third straight session with a pronounced gain against the dollar, fueling hopes that the recent all-time low represented a bottom. The lira gained about 3% on the dollar Thursday, bringing its week-to-date rise against the greenback to more than 10%. However, it is still down more than 15% thus far in August.
Don’t miss: Turkey’s woes won’t trigger a full-blown crisis across emerging markets, economist says
See also: How the lira selloff compares to Turkey’s previous crises
In the latest data, initial jobless claims fell more than expected in the latest week, nearing postrecession lows.
The Philadelphia Fed manufacturing index sank to a 21-month low of 11.9 in August, a reading that was below analyst expectations.
Construction of new houses increased by less than 1% in July, reflecting a recent slowdown in building that is likely tied to higher mortgage rates and growing shortages of skilled craftsmen.
What were market analysts saying?“Stocks reacted much more significantly to reported results this quarter than in the first quarter,” said Lindsey Bell, investment strategist at CFRA.
“Second-quarter earnings growth of 24.8% was the best since 2004 — excluding the postrecession rebound in 2010. The results pushed the S&P 500 1.5% higher since July 12, the day before JPMorgan kicked-off earnings season,” she said. “Underlying strength in corporate profitability and economic data should bode well for the market long-term. But near-term, as the risks become more of a focus, fundamental news will likely take a back seat and the market may struggle in a period that has been historically weak seasonally.”
Cliff Hodge, director of investments for Cornerstone Wealth, believes Thursday’s upside momentum is sustainable, given the strength of consumer demand highlighted by Walmart results. But he also expects politics will help to yield results on the trade front.
“Some announcements on trade, whether it’s with Nafta, the EU and China or all of the above, can be catalysts for the next leg higher. We’ve heard about progress made on all fronts, and murmurs out of China that higher-ups are not happy with President Xi’s hardline tactics bode well for renegotiated agreements. With midterms on the horizon, the administration will want some wins on trade to bolster chances that the Republicans keep both chambers,” Hodge said in a note.
“Earnings out of Walmart are very positive for the market as it is a reflection not just of Walmart’s online growth but it offers a positive snapshot of the U.S. consumer,” said Quincy Krosby, chief market strategist at Prudential Financial.
What stocks were in focus?Walmart WMT, +9.33% surged 9.3% after it reported adjusted second-quarter earnings that topped expectations, along with revenue that was above consensus expectations. The discount retailer also boosted its adjusted 2019 earnings forecast.
Cisco CSCO, +2.96% shares rallied 3% after the network equipment giant reported earnings that topped expectations and gave an outlook that was above analyst forecasts.
U.S.-listed shares of Teva Pharmaceutical Industries Ltd. TEVA, +7.30% jumped 7.3% after its generic EpiPen was approved for the U.S. market by the Food and Drug Administration. Teva’s product would mark the first true generic rival for the market-dominating EpiPen.
On the downside, J.C. Penney Co. JCP, -26.97% plummeted 27% after it reported an adjusted second-quarter loss that was much wider than expected. It also widened the loss it expects for the full year.
Federal regulators have subpoenaed Tesla Inc. TSLA, -0.96% , according to the Wall Street Journal, ramping up an investigation into whether Chief Executive Elon Musk was truthful when he tweeted last week that he had secured funding to take the electric-car maker private. The company’s stock fell 1%.
Amazon.com Inc. AMZN, +0.21% gained 0.2% on a report that it was competing against other suitors to buy out Landmark Theatres. Other theater chains, including AMC Entertainment Holding Inc. AMC, +2.26% and Cinemark Holdings Inc. CNK, +0.68% initially fell following the report but recovered to finish higher.
General Electric Co. GE, +0.65% remained in focus a day after the industrial conglomerate, whose share price has struggled for years, tumbled to its lowest level since 2009 as investors are not convinced that the company’s turnaround plan will stem the bleeding. GE’s stock climbed 0.7%.
Shares of Symantec Corp. SYMC, +4.64% advanced 4.6% after the antivirus software company confirmed it had received five director nominations from activist shareholder Starboard Value.
What did other markets do?European stocks were universally higher while Asian markets were all down.
Oil futures CLU8, +0.71% recovered from the previous session’s tumble to rise 0.7% while gold GCZ8, -0.34% settled fractionally lower and the U.S. dollar index DXY, -0.14% was fractionally higher.
—Ryan Vlastelica contributed to this report
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