U.S. stocks closed mostly higher Wednesday as investors took escalating trade tensions in stride to instead focus on improving economic fundamentals even as a weak technology sector hobbled the Nasdaq.
How did major benchmarks fare?
The Dow Jones Industrial Average DJIA, +0.61% gained 158.80 points, or 0.6%, to 26,405.76, leaving it less than 1% from its all-time closing high. It has been 163 trading days since the Dow’s last record, its longest such stretch since a period of 288 days that occurred between May 2015 and July 2016, according to the Dow Jones Data Group.
The S&P 500 SPX, +0.13% added 3.64 points, or 0.1%, to 2,907.95, within 0.3% of its record. Financials were the best performing stocks, rallying 1.8% as the 10-year Treasury yield TMUBMUSD10Y, +0.49% rose to 3.081%, its highest since May 17.
The Nasdaq Composite Index COMP, -0.08% bucked the trend to fall 6.07 points to 7,950.04.
What drove the market?
Trading on Wall Street has been relatively subdued now that earnings season is largely over and there have been few major economic indicators released this week. That has left an opening for markets to be driven by the latest developments on trade.
On Tuesday, President Donald Trump reiterated his hard-line stance on China during a news conference with Polish President Andrzej Duda and said the U.S. had “no choice” but to levy another $267 billion in duties on China. That would come on top of announced tariffs on about $200 billion in Chinese goods announced late Monday.
China responded with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24, and said it may introduce more measures if the U.S. goes ahead with higher tariffs.
Technology stocks have had some of the highest correlation to the trade issue as they generate a hefty percentage of their revenue from outside the U.S. and because they depend on Asian markets for their supply chains. The sector is also one of the strongest performers of the year, up 16.9%, a gain that is second only to the 18% rise of consumer-discretionary stocks.
While many are concerned that a full-blown trade war will become a huge headwind to global economic growth, investors have repeatedly shrugged off the issue over the past several months, choosing instead to focus on signs of improving economic fundamentals.
Read: How trade-war fears have become less of a factor for stock-market investors
In the latest economic data, the U.S. current-account deficit, a core component in a country’s balance of payments, shrank 17% in the second quarter.
What were analysts saying?
“We could be near peak political trade rhetoric, but without any visible effect on economic data, investors are just looking through the noise. We’re essentially still in a negotiation phase, and until we have set policies that we can evaluate, markets will continue to ignore this to a certain extent,” said Matt Forester, chief investment officer of BNY Mellon’s Lockwood Advisors.
“The U.S. environment remains very positive, and there’s a big difference between the sensitivity of the stock market to trade — which is most important to large U.S. stocks — and the sensitivity of the overall economy,” he said.
Bank of America Merrill Lynch strategists credited the market’s resilience this week in the face of escalating trade war to the fact that announcement of the details has helped to “clear the air” as well as the belief among investors that the two countries will eventually negotiate a deal.
What stocks were in focus?
Amazon.com Inc. AMZN, -0.75% shares slid 0.8% on news that the European Union has opened a preliminary investigation into how the online retailer deals with companies who sell their items via Amazon.
Business-software vendor SAP SE SAP, -0.66% said it would expand its partnership in online platform services with Alibaba Group Holding Ltd. BABA, +3.82% . U.S.-listed shares of SAP fell 0.7% while Alibaba rallied 3.8%.
Microsoft Corp. MSFT, -1.33% late Tuesday said it was raising its quarterly dividend by nearly 10%. The stock fell 1.3%.
Related: Microsoft tries to steal Salesforce’s thunder with new AI, mixed reality offerings
U.S.-listed shares of Bayer AG BAYRY, +1.07% rose 1.1% after the pharmaceutical company said it is stepping up the legal defense of its flagship weed killer after a verdict in a recent case alleged the chemical causes cancer.
The stock of Molecular Templates Inc. MTEM, +52.44% jumped 52% after it announced a joint-development partnership with Japan-based Takeda Pharmaceutical Co. TKPYY, -1.99% .
Tilray Inc. TLRY, +38.12% shares jumped 38% in a session marked by multiple halts due to volatility. The dramatic swings come after the U.S. Drug Enforcement Administration signed off on a plan for the company to import a marijuana product to test its effectiveness in treating a disorder that affects millions of Americans. The stock has been a trading favorite this past month as investors bet that stocks related to marijuana could see massive growth.
Check out: As Tilray soars, short sellers keep betting against pot stocks
What were other markets doing?
European stocks finished mostly higher and Asian stock markets rose as Japanese stocks jumped further amid added gains for dollar-yen and Chinese stocks shrugged off new tariffs. The Bank of Japan reiterated that it would keep interest rates extremely low “for an extended period,” holding to forward guidance it first introduced in July.
Crude oil CLK9, +1.05% rallied nearly 2%, while gold prices GCM9, +0.46% settled higher and the U.S. dollar index DXY, -0.10% edged down.
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