U.S. Stocks Remain Firmly Positive After Early Rally

After moving sharply higher early in the session, stocks continue to see considerable strength in mid-day trading on Thursday. The major averages have given back some ground since then early rally but remain firmly in positive territory.

Currently, the major averages are holding on to strong gains. The Dow is up 430.84 points or 1.6 percent at 26,786.31, the Nasdaq is up 123.29 points or 1.6 percent at 8,100.17 and the S&P 500 is up 38.98 points or 1.3 percent at 2,976.76.

The rally on Wall Street partly reflects a positive reaction to news that the U.S. and China plan to hold high level trade talks in early October.

A statement from China’s Commerce Ministry said both sides agreed to the new round of talks during a phone call between Chinese Vice Premier and chief trade negotiator Liu He and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

“Both sides agreed they should work together and take practical actions to create favorable conditions for the negotiations,” China’s Commerce Ministry said, according to a CNBC translation.

A spokesperson for the U.S. Trade Representative’s office confirmed the phone call and said the U.S. and China agreed to hold meetings “in the coming weeks.”

U.S. and Chinese officials will purportedly hold deputy-level talks later this month in preparation for the meeting in October.

A report from payroll processor ADP showing stronger than expected private sector job growth in August has also generated buying interest.

The report said private sector employment surged up by 195,000 jobs in August after climbing by a downwardly revised 142,000 jobs in July.

Economists had expected employment to increase by about 149,000 jobs compared to the addition of 156,000 jobs originally reported for the previous month.

“Businesses are holding firm on their payrolls despite the slowing economy,” said Mark Zandi, chief economist of Moody’s Analytics. “Hiring has moderated, but layoffs remain low. As long as this continues recession will remain at bay.”

On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.

Employment is expected to increase by 158,000 jobs in August after climbing by 164,000 jobs in July, while the unemployment rate is expected to hold at 3.7 percent.

Shortly after the start of trading, the Institute for Supply Management released a separate report showing a notable acceleration in the pace of growth in U.S. service sector activity in the month of August.

The ISM said its non-manufacturing index climbed to 56.4 in August after falling to 53.7 in July, with a reading above 50 indicating growth in service sector activity. Economists had expected the index to inch up to 54.0.

The bigger than expected increase by the non-manufacturing index came after it dropped to its lowest level since August of 2016 in the previous month.

Sector News

Oil service stocks are turning in some of the market’s best performances in mid-day trading, with the Philadelphia Oil Service Index spiking by 4.6 percent.

The rally by oil service stocks comes amid a continued increase by the price of crude oil, as crude for October delivery is surging up $1.35 to $57.61 a barrel after soaring $2.32 to $56.26 a barrel on Wednesday.

Substantial strength also remains visible among semiconductor stocks, as reflected by the 3.4 percent jump by the Philadelphia Semiconductor Index.

Financial, transportation, steel and computer hardware stocks are also seeing considerable strength on the day, reflecting broad-based buying interest.

Meanwhile, gold stocks are among the few groups bucking the uptrend, with a steep drop by the price of the precious metal weighing on the sectors.

With gold for December delivery plummeting $33.10 to $1,527.30 an ounce, the NYSE Arca Gold Bugs Index has plunged by 5.4 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index surged up by 2.1 percent, while China’s Shanghai Composite Index jumped by 1 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index slid by 0.6 percent, the German DAX Index advanced 0.9 percent and the French CAC 40 Index jumped by 1.1 percent.

In the bond market, treasuries have shown a steep drop after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 11.5 basis points at 1.574 percent.

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