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U.S. Stocks Rebound Strongly Amid Sensitivity To Trade Talk News

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Reflecting considerable sensitivity to sentiment regarding the escalating U.S.-China trade dispute, stocks showed a substantial turnaround over the course of the trading session on Friday after moving sharply lower early in the session.

The major averages bounced well off their worst levels of the day and into positive territory. The Dow climbed 114.01 points or 0.4 percent to 25,942.37, the Nasdaq inched up 6.35 points or 0.1 percent to 7,916.94 and the S&P 500 rose 10.68 points or 0.4 percent to 2,881.40.

Despite the rebound on the day, the major averages moved sharply lower for the week. The Nasdaq plunged by 3 percent, while the Dow and the S&P 500 tumbled by 2.1 percent and 2.2 percent, respectively.

Stocks initially came under pressure amid renewed concerns about the impact of a U.S.-China trade war after President Donald Trump followed through on his threat to raise tariffs on Chinese imports.

The U.S. hiked the tariff on $250 billion worth of Chinese goods from 10 percent to 25 percent after the U.S. and China failed to reach a trade deal by a midnight deadline.

Additionally, Trump noted in a post on Twitter that the process has begun to place tariffs on the remaining $325 billion worth of Chinese imports.

Trump praised the massive tariff payments to the U.S. Treasury and said there is "absolutely no need to rush" to reach a trade agreement with China.

However, stocks showed a significant recovery after Treasury Secretary Steven Mnuchin wrapped up a second day of trade talks, calling the discussions "constructive."

The rebound on Wall Street reflected how sensitive the markets are to the sentiment regarding the escalating trade dispute, with traders generally still optimistic a deal will eventually be reached.

The developments on the trade front largely overshadowed a typically closely watched report from the Labor Department showing consumer prices increased by slightly less than expected in April.

The Labor Department said its consumer price index rose by 0.3 percent in April after climbing by 0.4 percent in March. Economists had been expecting another 0.4 percent increase.

Excluding food and energy prices, core consumer prices inched up by 0.1 percent for third consecutive month compared to economist estimates for a 0.2 percent uptick.

Compared to the same month a year ago, consumer prices in April were up by 2.0 percent, reflecting a modest acceleration from the 1.9 percent growth in March.

The annual rate of growth in core consumer prices also crept up to 2.1 percent in April from 2.0 percent in the previous month.

Sector News

Utilities stocks showed a significant move to the upside over the course of the session, driving the Dow Jones Utility Average up by 1.6 percent. The index ended the previous session at a two-month closing low.

Considerable strength also emerged among chemical stocks, as reflected by the 1.5 percent gain posted by the S&P Chemical Sector Index.

Software and commercial real estate stocks also moved notably higher on the day, while substantial weakness remained visible among tobacco, gold, and biotechnology stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday, although Japan's Nikkei 225 Index bucked the uptrend and dipped by 0.3 percent. China's Shanghai Composite Index spiked by 3.1 percent and Hong Kong's Hang Seng Index advanced by 0.8 percent.

The major European markets turned mixed over the course of the session. While the U.K.'s FTSE 100 Index dipped by 0.1 percent, the French CAC 40 Index rose by 0.3 percent and the German DAX Index climbed by 0.7 percent.

In the bond market, treasuries pulled back near the unchanged line after moving higher early in the day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a tenth of a percent to 2.455 percent.

Looking Ahead

Any news regarding trade talks could impact the markets next week, although traders are also likely to keep an eye on reports on import and exports prices, retail sales, industrial production, and housing starts.

On the earnings front, Walmart (WMT), Cisco Systems (CSCO), Take-Two (TTWO), Ralph Lauren (RL), Tilray (TLRY), Alibaba (BABA), and Nvidia (NVDA) are among the companies due to report their quarterly results next week.

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