U.S. stocks set up for more gains, as trade fears stay muted

U.S. stocks opened firmly higher on Thursday, extending a late-session rally from the prior session, as investors dialed back on fears that a trade spat between the U.S. and China will materialize.

The major equity indexes staged a big turnaround Wednesday after opening sharply lower, as traders struggled to interpret the possible impact of the trade standoff on U.S. corporate earnings and growth.

What are main benchmarks doing?

Dow Jones Industrial Average
DJIA, +0.69%
rise rose about 150 points, or 0.6%, to 24,410. Blue chips are attempting to mark their first three-session win streak since the three-day period ended Feb. 26, according to FactSet data. The S&P 500 index
SPX, +0.46%
was up 12 points, or 0.4%, to 2,656, led by a 1.2% gain in energy and a 0.8% climb in technology stocks.

Meanwhile, the technology-laden Nasdaq Composite Index
COMP, +0.49%
added 40 points, or 0.6%, to 7,081.

On Wednesday, the Dow Jones Industrial Average recovered from a 510-point intraday loss, at its session low, to finish up about 230 points, or 1%, to 24,264.30 The S&P 500 and Nasdaq gained 1.2% and 1.5%, respectively.

The dramatic turnaround helped the Nasdaq end in positive territory for the year. The S&P 500 finished safely above its 200-day moving average for a second straight session, a positive sign for long-term momentum trends.

Read: Dimon: Investors underestimate threat of drastic action by Fed, other central banks

Extreme volatility has been a hallmark of equities lately. So far this year, the S&P 500 has had three times as many sessions with a 1% move than it recorded in all of 2017.

Whats driving markets

Worries about trade hostilities between the two biggest economies in the world continued to ease. Stocks were battered initially on Wednesday after tit-for-tat tariffs on imports were announced by the U.S. and China.

But now there will be shift to a period of negotiation, with the U.S. and China expected to spend six months in talks to resolve their trade differences. As well, speculation that the U.S. could survive even a protracted trade war is stoking some upbeat sentiment among investors.

Read: Game of chicken: Trump adopts high-risk strategy in fight with China over unfair trade

Investors are increasingly looking to the start of earnings season next week, with plenty of optimism baked in. For the first quarter 2018 reporting period, the estimated earnings growth rate for the S&P 500 is 17.3%. That would mark the highest growth since the first quarter of 2011, according to FactSet senior earnings analyst John Butters.

Check out: How a trade skirmish could become a global trade war

What are strategists saying?

I think, the fact that administration talked up trade negotiations is helping the alleviate the trade war fears for now. On a technical note, yesterdays snap back was impressive and is leading to some stabilization ahead of the labor report tomorrow, said Peter Cardillo, chief market economist at First Standard Financial, in emailed comments.

What stocks are moving?

Conatus Pharmaceuticals Inc.
CNAT, -29.45%
shares sank 29% on a failed drug study.

Shares of Sonoma Pharmaceuticals Inc.
SNOA, +19.82%
surged 17% after the Food and Drug Administration approved its antimicrobial skin gel.

General Nutrition Corp.
GNC, -0.56%
traded flat after the vitamin retailer said it would expand into Australia in a partnership with Australian health products distributor, Rapid Nutrition.

Shares of Monsanto Co.
MON, +0.94%
rose 0.7% Thursday, after the seeds and agricultural products company missed profit and sales expectations, but said it remained confident that the merger with Bayer AG
BAYN, +2.45%
would be completed by the end of the current quarter. Bayers shares were up 2.6%.

Which economic reports are in focus?

Initial U.S. jobless claims jumped by 24,000 to 242,000 in the seven days ended March 31, the government said Thursday. Economists surveyed by MarketWatch had forecast claims to total 225,000, but remains extremely low and reflect the best labor market in decades.

The first two months of the year have seen a rapid expansion in jobs, but economists are expecting March growth will come in slower.

Meanwhile, the U.S. trade deficit rose 1.6% in February and remained near a 10-year high, underscoring the seemingly near impossible task of the Trump administration to dramatically reduce the gap as the president has vowed.

Check out: MarketWatchs Economic Calendar

As for Federal Reserve speakers, Atlanta Fed President Raphael Bostic is scheduled to address a conference on financial literacy at University of South Florida Sarasota-Manatee at 1 p.m. Eastern.

What are other markets doing?

Asian stock markets rose on optimism over the potential for U.S.-China trade negotiations, with Singapore stocks climbing 2.2%. European stocks
SXXP, +1.88%
shot to levels not seen in three weeks. Gold futures
GCM8, -0.61%
pulled lower, while the ICE U.S. Dollar Index edged up. Oil prices
CLK8, +1.12%
were modestly higher.

Related Topics U.S. Stocks Markets NY Stock Exchange NASDAQ

Quote References DJIA +166.83 +0.69% SPX +12.23 +0.46% COMP +34.46 +0.49% CNAT -1.77 -29.45% SNOA +0.72 +19.82% GNC -0.02 -0.56% MON +1.09 +0.94% BAYN +2.24 +2.45% SXXP +6.91 +1.88% GCM8 -8.20 -0.61% CLK8 +0.71 +1.12% Show all references
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