STI SunTrust Banks Inc

By Riva Gold 

Signs of easing trade tensions between the U.S. and China continued to push stocks higher Friday, putting major U.S. indexes on track to post their fourth consecutive week of gains.

The Dow Jones Industrial Average rose 125 points, or 0.5%, to 24495, while the S&P 500 added 0.6% and the Nasdaq Composite climbed 0.3%. The gains build on an impressive climb higher over the past month, as signs of a still-growing U.S. economy, a flexible Federal Reserve and progress on trade negotiations have encouraged investors. Since its Dec. 24 trough, the Dow Jones Industrial Average is up more than 12%.

New York Fed President John Williams said Friday that interest rate and balance sheet adjustments will depend on the economy's performance, and added that an extended government shutdown could slow the economy. The comments helped reassure investors that the Fed will take a slow, measured approach to short-term interest-rate hikes this years.

Also contributing to Friday's gains is optimism the U.S. will ratchet back tariffs on Chinese imports. The Wall Street Journal reported Thursday that U.S. Treasury Secretary Steven Mnuchin proposed the idea of lifting some or all tariffs on Chinese imports to advance trade talks.

A Treasury spokesman said bargaining positions "are all at the discussion stage" and that "neither Secretary Mnuchin nor Ambassador Lighthizer has made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China."

Trade friction had weighed down market sentiment in recent months amid concerns about the impact it would have on economic growth and corporate supply chains. A Federal Reserve report this week showed firms said they were struggling with higher input prices, in part due to tariffs.

Kevin Gardiner, global investment strategist at Rothschild Wealth Management, said that while longer term it is less clear whether the outcome of the trade negotiations might be good or bad for the U.S. economy, "anything which makes international trade more difficult, that puts sand in the wheels of businesses and disrupts their increasingly global supply chains has got to be bad for business."

Corporate earnings have also been a source of support for the market this week and continued to drive moves in individual companies on Friday.

SunTrust Banks was a big gainer among individual stocks, rising 2% after it reported an increase in revenue and a drop in costs.

Shares of Netflix fell 1.9% after the streaming-video giant said revenue grew less than analysts expected, while American Express moved 2.5% lower despite posting its highest annual profit and revenue.

Overall, slightly more companies than usual have been beating analysts' earnings estimates so far for the fourth quarter, according to data from Refinitiv.

That comes against a significantly lowered bar, however, following steep downgrades to fourth-quarter and 2019 earnings forecasts in recent weeks.

"Analysts' [earnings] revision momentum has gone off a cliff," said David Bowers, who heads up research at Absolute Strategy Research. For stocks and the broader environment for risky assets "we think we're not out of the woods yet," he said.

Benchmarks in Europe, Japan, Shanghai and Hong Kong all climbed Friday, rising more than 1%.

In Europe, the trade-sensitive auto sector was one of the best performers, rising 2.3% for the day and adding to gains of 8.7% this month after a bruising selloff in late 2018. The broader Stoxx Europe 600 climbed 1.6%, around a six-week high.

Hong Kong's Hang Seng rose 1.3% amid solid gains in shares of health-care companies, while Japan's Nikkei Stock Average added 1.3%.

--Corrie Driebusch contributed to this article

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

January 18, 2019 10:43 ET (15:43 GMT)

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