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Stocks Move Notably Higher As Trade Talks Extended - U.S. Commentary

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Stocks moved mostly higher over the course of the trading day on Friday, more than offsetting the moderate weakness seen in the previous session. With the upward move, the major averages reached their best closing levels in over three months.

The major averages fluctuated late in the session but ended the day firmly positive. The Dow climbed 181.18 points or 0.7 percent to 26,031.81, the Nasdaq jumped 67.84 points or 0.9 percent to 7,527.54 and the S&P 500 rose 17.79 points or 0.6 percent to 2,792.67.

For the holiday-shortened week, the Nasdaq advanced by 0.7 percent, while the Dow and the S&P 500 both climbed by 0.6 percent.

The strength on Wall Street came as traders continued to express optimism about ongoing trade talks between the U.S. and China.

Treasury Secretary Steve Mnuchin revealed later in the day that Chinese negotiators will extend their visit to Washington in an effort to build on the progress made during this week's talks.

Mnuchin told reporters a meeting between President Donald Trump and Chinese President Xi Jinping reportedly under discussion for next month may depend on the outcome of the next few days of negotiations.

Meanwhile, Trump said during a meeting with Chinese Vice Premier Liu that U.S. and Chinese officials are making "a lot of progress" in the trade talks.

Trump said there was a "very good chance" the U.S. and China could reach a long-term trade deal but at the same time said "who knows" whether a final agreement will be struck.

A report from CNBC said China has committed to buying up to $1.2 trillion worth U.S. goods, although sources said the two sides remain far apart on issues concerning the forced transfer of intellectual property.

Trump has recently suggested he could postpone an increase in tariffs set to take effect in early March if the trade talks continue to show signs of progress.

Trading activity was somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

A batch of disappointing U.S. economic data weighed on the markets on Thursday, although trade talk optimism helped limit the downside.

Sector News

Tobacco stocks saw considerable strength on the day, extending the strong upward move seen in recent sessions. The NYSE Arca Tobacco Index surged up by 2.6 percent to its best closing level in well over three months.

Significant strength was also visible among computer hardware and networking stocks, with the NYSE Arca Computer Hardware and NYSE Arca Networking Index jumping by 2 percent and 1.7 percent, respectively.

Reflecting optimism about increased Chinese demand, steel stocks also turned in a strong performance, driving the NYSE Arca Steel Index up by 1.4 percent.

Biotechnology, software, and housing stocks also moved notably higher, while telecom stocks bucked the uptrend by the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Friday. Japan's Nikkei 225 Index dipped by 0.2 percent, while China's Shanghai Composite Index spiked by 1.9 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index edged up by 0.2 percent, the German DAX Index and the French CAC 40 Index rose by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries rebounded following the notable drop seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.655 percent.

Looking Ahead

Further developments regarding the U.S.-China trade talks may impact next week's trading along with reports on housing starts, factory orders, pending home sales, fourth quarter GDP, and manufacturing activity.

Traders are also likely to keep an eye on Federal Reserve Chairman Jerome Powell's testimony before the Senate Banking Committee and the House Financial Services Committee.

On the earnings front, Home Depot (HD), Macy's (M), Toll Brothers (TOL), Best Buy (BBY), Campbell Soup (CPB), Lowe's (LOW), Office Depot (ODP), HP Inc. (HPQ), J.C. Penney (JCP), and Gap (GPS) are among the companies due to report their quarterly results next week.

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