U.S. stocks remained modestly higher on Thursday as a meeting between the country’s President Donald Trump and his Chinese counterpart Xi Jinping was set to get under way, with investors looking for clues to how the leaders of the world’s economic powerhouses will tackle trade and geopolitical issues.
The mood in the market, however, remained cautious as investors awaited nonfarm-payrolls data due on Friday.
Thursday’s action follows the biggest one-day reversal for equities in more than a year in the previous session which was triggered in part by the Federal Reserve’s admission that it will start unwinding its balance sheet sooner than expected.
The S&P 500 index rose 6 points, or 0.3%, to 2,359, with eight of its 11 main sectors trading in the green. Energy shares, which followed rising oil prices higher, were leading the gains. Consumer-discretionary stocks, especially retailers, were also higher. But investors sold telecoms shares, with the sector down more than 1%.
The Dow Jones Industrial Average gained 56 points, or 0.3%, to 20,704, On Wednesday the blue-chip index went from a 200-point gain to finish down 0.2%, the benchmark’s biggest blown lead since February 2016.
The Nasdaq Composite Index climbed 15 points, or 0.3%, to 5,880. The tech-heavy index went from an intraday record of 5,936.39 to close 0.6% lower on Wednesday.
“We are seeing a short-term snap back from yesterday’s sharp selloff with the hardest hit sectors recovering,” said Frank Cappelleri, chartered market technician at Instinet.
Sellers stepped in after the minutes of the Fed’s March meeting noted policy makers’ plans to reduce its $4.5 trillion balance sheet this year, cutting back on government and mortgage-backed bonds that have been supporting equity markets world-wide.
In addition, some Fed members said in those minutes that stock prices were “quite high relative to standard valuation measures.”
As the market neared its close, the losses for stocks intensified.
“Investors broadly thought that shrinking the Fed balance sheet was a 2018 phenomenon but the minutes suggested that it might be sooner, raising the specter of less accommodation,” said Eric Wiegand, senior portfolio manager at the Private Client Reserve, U.S. Bank.
House Speaker Paul Ryan’s suggestion that the Senate doesn’t have a tax-reform plan, which itself may take longer than health care reform, triggered a second leg to the late session selloff, according to Chris Weston, IG’s chief market strategist.
How stocks finish the current session could be crucial, he said: “There is no doubt about it, the bears have gained an advantage, but whether we see a more lasting trend lower is obviously yet to be seen.”
“The stage is set though for a move 2-5% lower, and the bulls will absolutely need to step in today and tonight or risk assets should go lower from here,” Weston said.
Eyes on Trump, jobs report: Investors will be closely watching the Trump/Xi Jinping summit that starts Thursday. There are fears that the two-day meeting could end in an acrimonious fashion, spooking global financial markets.
The Trump-Xi summit is somewhat overshadowing the March nonfarm-payrolls data as a focus for investors. Economists expect the monthly jobs report, due Friday, will show that job creation could slow after the two previous sharp gains.
Thursday’s data on jobless claims showed the number of Americans who applied for unemployment benefits last week sank by 25,000 to 234,000, marking the second-lowest level of the current economic expansion and reflecting a tight labor market in which firms say it’s hard to find good help. On Wednesday, data on private-sector hiring showed far more jobs created than anticipated.
Stocks to watch: Shares of Sunoco LP soared 18% after Japan-based Seven & I Holdings Co. Ltd. which owns the 7-Eleven chain, said it would acquire more than 1,000 U.S. convenience stores and gas stations from Sunoco for $3.3 billion.
CarMax Inc. shares rose 2.2% after the nation’s biggest retailer of used cars beat earnings and sales estimates for the fourth quarter.
Constellation Brands Inc. reported stronger fourth-quarter earnings on Thursday, which it attributed to gains in high-end whiskey sales. Shares jumped 6.3%.
Shares of largest retailers that have sold off sharply lately rebounded. L Brands, Inc. gained 10%, Bed Bath & Beyond Inc., Staples Inc., and Kohl’s Corp were all sharply higher.
Other markets: Asian stocks finished in the red, with the Nikkei hitting its worst level in four months and closing down 1.4% but European stocks traded mostly higher.
European Central Bank President Mario Draghi in a speech Thursday effectively ruled out a near-term interest-rate increase, which briefly sent the euro to a three-week low against the dollar.
The dollar index edged up. Gold prices rose while oil prices climbed. The yield on the 10-year Treasury note rose to 2.35%.