Wall St climbs on energy, financials boost

US stocks climbed on Wednesday, recovering from early declines on gains in energy and financial shares, but investors remained leery about the potential for another flare-up in the US-China trade war.

The financial sector was up 0.91%, recouping all of the prior day’s losses that came on a deepening of the US Treasury yield curve inversion, which often precedes a recession.

Gains in the benchmark S&P 500 index were also supported by a 1.40% jump in energy stocks after industry data showed a fall in stockpiles of US crude, boosting oil prices, which settled up more than 1.5%.

The two have been the worst performing of the 11 major S&P sectors in August.

Investors took some relief in the lack of new developments on the trade front, although the US Trade Representative’s office on Wednesday reaffirmed President Donald Trump’s plans to impose an additional 5% tariff on a list of $300 billion of Chinese imports starting on September 1 and December 15.

“If you look at the sectors in terms of how the performance has lined up, it looks like people are coming back to having some belief in the economy,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois.

“It is sustainable but it depends a lot on what sort of announcements we have because realistically the economy is in pretty decent shape, it is just the concern is to the whole trade situation pulling the rug out from underneath it.”

Next week, investors will look toward the monthly jobs report and manufacturing data which could guide expectations on the likelihood of another rate cut from the Federal Reserve at its mid-September meeting.

The Dow Jones Industrial Average rose 258.2 points, or 1%, to 26 036.1, the S&P 500 gained 18.78 points, or 0.65%, to 2 887.94 and the Nasdaq Composite added 29.94 points, or 0.38%, to 7 856.88.

In another factor that could support stock prices, the 30-year US Treasury yield fell below that of the S&P 500 dividend yield, making equities a more attractive income alternative.

“Whether it is the Federal Reserve signaling more cuts in the future or just in general this rally in the bond market, but overall lower rates you would think put some sort of floor on the market as well,” said Mark Kepner, equity trader at Themis Trading in Chatham, New Jersey.

Shares of Autodesk slid 6.74%, as the worst performer on the S&P 500, after the company cut its full-year earnings forecast.

Shares of Tiffany & Co rose 3.02% after the luxury jeweler reported quarterly earnings above analysts’ estimates.

Advancing issues outnumbered declining ones on the NYSE by a 2.44-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favoured advancers.

The S&P 500 posted 11 new 52-week highs and 38 new lows; the Nasdaq Composite recorded 26 new highs and 154 new lows.

About 5.81 billion shares changed hands in US exchanges, compared with the 7.42 billion daily average over the last 20 sessions.