By Stephen Culp
NEW YORK (Reuters) -Wall Street stocks advanced and U.S. Treasury yields rebounded on Friday as investors assessed the health of regional banks and President Donald Trump said his face-to-face trade talks with Chinese President Xi Jinping were still on.
All three major U.S. stock indexes closed in positive territory after struggling for direction in early trading, and all three notched weekly gains.
Benchmark Treasury yields and the dollar turned higher, while gold pulled back after a record run sent the precious metal to all-time highs.
Worries over potential systemic credit problems in the banking sector abated the day after Zions disclosed it would take a $50 million loan loss in the third quarter and Western Alliance initiated a lawsuit alleging fraud by an investment firm.
The KBW Regional Banking index advanced 1.7% in a partial recovery from Thursday’s 5.0% plunge.
“It took a night to sleep on it, but some calm has come in over the probably overblown worries in the regional bank area,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “The truth is the financial sector is likely still on firm footing; just a couple companies had some bad news, but it’s not systemic.”
Trade tensions between Washington and Beijing were calmed by Trump’s assurances that his proposed 100% tariff on Chinese imports would not be sustainable. He confirmed he would meet with Chinese President Xi Jinping in two weeks in South Korea.
“We’ve seen this movie before,” Detrick added. “A week ago, President Trump was talking 100% tariffs and the market had its worst selloff in months and now today he’s clearly putting some water on that fire, saying he and President Xi have a good relationship.”
The first official week of the third-quarter earnings season is in the books, with 58% of companies in the S&P 500 having reported. Of those, 86% have delivered stronger-than-expected results. Analysts now expect third-quarter S&P 500 earnings growth of 9.3% year-on-year, up from 8.8% as of October 1, according to LSEG data.
The Dow Jones Industrial Average rose 238.37 points, or 0.52%, to 46,190.61, the S&P 500 rose 34.94 points, or 0.53%, to 6,664.01 and the Nasdaq Composite rose 117.44 points, or 0.52%, to 22,679.98.
European stocks closed lower as signs of credit stress in U.S. regional banks dampened investor risk appetite, driving them to safe-haven assets.
MSCI’s gauge of stocks across the globe fell 0.21 points, or 0.02%, to 984.18.
The pan-European STOXX 600 index fell 0.95%, while Europe’s broad FTSEurofirst 300 index fell 20.72 points, or 0.91%.
Emerging market stocks fell 16.86 points, or 1.22%, to 1,362.10. MSCI’s broadest index of Asia-Pacific shares outside Japan closed lower by 1.24%, to 706.04, while Japan’s Nikkei fell 695.59 points, or 1.44%, to 47,582.15.
U.S. Treasury yields rose and the dollar strengthened as worries stemming from the escalating trade war and regional banks’ credit quality ebbed. The greenback, however, remained on track for a weekly loss.
The yield on benchmark U.S. 10-year notes rose 2.9 basis points to 4.005%, from 3.976% late on Thursday.
The 30-year bond yield rose 1.7 basis points to 4.6005% from 4.583% late on Thursday.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 3.3 basis points to 3.459%, from 3.426% late on Thursday.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.16% to 98.42, with the euro down 0.15% at $1.1669.
Against the Japanese yen, the dollar strengthened 0.04% to 150.48.
Oil prices inched higher but lost ground on the week amid the fog of global supply uncertainty.
U.S. crude rose 0.14% to settle at $57.54 per barrel, while Brent settled at $61.29 per barrel, up 0.38% on the day.
Gold prices pulled back from record highs, pressured by a firmer dollar.
Spot gold fell 2.19% to $4,230.60 an ounce. U.S. gold futures fell 1.3% to $4,224.60 an ounce.
(Reporting by Stephen Culp; Additional reporting by Ian Withers and Stella Qiu; Editing by Nia Williams and Nick Zieminski)
