Stocks surge on optimism about US-China trade talks

Stocks marched higher on Wall Street Friday afternoon, riding investor optimism that the U.S. and China can make progress in their punishing trade war.

The broad rally drove the Dow Jones Industrial Average more than 350 points higher and had the S&P 500 index on track to close out its first weekly gain in four weeks.

Before meeting with Chinese Vice Premier Liu He for trade talks at the White House, President Donald Trump said, “Good things are happening.” Investors are hopeful the two sides can reach at least a limited deal on trade and tamp down tensions that have already dragged down manufacturing around the world.

One set of U.S. tariffs is scheduled to rise on Chinese products next week, and another round of tariffs is scheduled to take effect in December. The worry is that all the uncertainty about global trade may spill over into stronger areas of the economy, such as household spending, and cause a recession.

Treasury yields rose as investors felt less need for safety and dumped bonds. The yield on the 10-year Treasury, a benchmark for mortgages and many other kinds of loans, jumped to 1.74% from 1.65% late Thursday, a big move.

The jump in yields helped send bank stocks higher on expectations of bigger profits for making loans. JPMorgan Chase rose 2.1%, and Bank of America climbed 1.9%.

Technology stocks, which often do lots of business with China, also helped power the indexes higher. Apple climbed 2%, and Broadcom added 2.8%.

KEEPING SCORE: The S&P 500 index was up 1.4%, as of 1:23 p.m. Eastern time. It was earlier up as much as 1.9%. The Dow climbed 359 points, or 1.4%, to 26,856 after earlier being up nearly 500 points.

The Nasdaq rose 1.6%. The Russell 2000 index of smaller company stocks outpaced the broader market with a 2.4% gain.

TAMPING DOWN TRADE TENSIONS: Markets around the world have swung sharply on every morsel of progress or dissonance dribbling out about the U.S.-China trade war.

Any breakthrough on trade would mark a sharp turnaround from expectations earlier this week when the U.S. blacklisted a group of Chinese technology companies over alleged human rights violations. China has since signalled that it is open to making even a partial deal.

The Trump administration has already raised tariffs on more than $360 billion worth of Chinese imports, but the stakes have grown. If tariff increases scheduled for this upcoming Tuesday and December go through, they would cover nearly everything China ships to the United States.

EUROPE TOO: Stocks jumped across Europe on hopes that the United Kingdom and European Union can reach a trade deal ahead of London’s pending exit from the bloc.

The United Kingdom is set to leave the European Union on Oct. 31, and analysts say a departure without a trade deal in place could rock markets and economies across the region.

The German DAX surged 2.9%, while the CAC 40 in France jumped 1.7%. The FTSE 100 in London rose 0.8%, held back in part by a stronger British pound, which adds pressure on British exporters.

ENERGY: A missile strike on an Iranian tanker revived oil supply concerns and pushed energy prices higher. Benchmark U.S. crude rose 1.4% and Brent crude, used to price international oils, rose 1.7%.

The explosion follows other attacks earlier this year on tankers in the Persian Gulf, through which about 20% of all oil traded worldwide passes.

The rise in energy prices lifted oil and energy services companies. Exxon rose 1.4% and Schlumberger rose 5.2%.

TIGHT SCREWS: Fastenal surged 16% after the maker of fasteners and other industrial products reported surprisingly good first quarter profit and revenue. The company reported solid growth from its industrial vending and onsite services businesses.

NOT SO GOLDEN: Shares in Newmont Goldcorp was among the biggest decliners in the S&P 500 as gold prices fell, reflecting a shift by investors to more risky holdings. The stock slid 2.7%.

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AP Business Writer Damian J. Troise contributed.