Dow logs highest close since February on optimism over trade talks

U.S. stocks rallied for a second session Friday, with the Dow Jones Industrial Average closing at its highest since February as optimism that the U.S. and China will eventually resolve their trade standoff offset fears about Turkey’s currency crisis.

However, weak tech names, notably Tesla Inc., Nvidia Corp., and Applied Materials Inc., limited the Nasdaq’s upside momentum.

How did the main benchmarks fare?

The Dow industrials DJIA, +0.43% gained steam as the session progressed to rise 110.59 points, or 0.4%, to 25,669.32, its highest close since Feb. 26. For the week, it rallied 1.4%. The S&P 500 index SPX, +0.33% climbed 9.44 points, or 0.3%, to 2,850.13, rising 0.6% for the week.

The Nasdaq Composite COMP, +0.13% added 9.81 points, or 0.1%, to 7,816.33 for a weekly drop of 0.3%. The iShares PHLX Semiconductor ETF SOXX, -0.75% a popular index that tracks semiconductor manufacturers, fell 0.8% on weakness in quarterly results from chip makers Nvidia NVDA, -4.90%  and Applied Materials AMAT, -7.72%  Analysts have also noted that tech companies have the most exposure to foreign sales.

On Thursday, the Dow, S&P 500 and Nasdaq Composite COMP, +0.13% all rose with the blue-chip index logging its best day since April.

Read: This bull market in U.S. stocks stands just days away from the history books

What drove the market?

Investors continue to monitor the latest developments on the trade front. On Thursday, there was cause for optimism as the U.S. and China prepared to resume trade talks next week. Officials from both countries are also working on a road map to reach some sort of a deal that will lead to a summit between President Trump and Chinese leader Xi Jinping in November, The Wall Street Journal reported.

But Turkey remained a concern with the Turkish currency down more than 4% against the U.S. dollar USDTRY, +3.2826% with the buck buying 6.053 lira, compared with 5.8246 lira late Thursday in New York.

While geopolitical issues surrounding trade and Turkey will likely remain short-term market drivers, investors are also monitoring the final batch of second-quarter results, which are expected to neutralize some of the headwind from abroad.

What were strategists saying?

“Dealers will be paying close attention to the trade talks between the U.S. and China, as well as the political wrangling with Turkey. U.S. stocks are holding up relatively well, but if global sentiment sours, the impressive strength of the Dow Jones and S&P 500 could be chipped away at,” said David Madden, an analyst at CMC Markets UK, in a note.

Which stocks were in focus?

Tesla Inc. TSLA, -8.93%  shares slumped 8.9% after Chief Executive Elon Musk told the New York Times the past year had been “excruciating” and “the most difficult and painful” of his career.

Nvidia and Applied Materials both reported earnings late Thursday. A decline in cryptocurrency-mining sales weighed on Nvidia, sending shares down 4.9%, while a weaker-than-expected guidance pushed Applied Materials shares down by 7.7%.

Nordstrom Inc. JWN, +13.20% soared 13% after the retailer posted better-than-expected earnings and raised its outlook.

Farm-equipment maker Deere & Co. DE, +2.36% fell after issuing a downbeat growth outlook but since has recovered to rise 2.4%.

DSW Inc. DSW, -4.85% shares sank 4.9% after the stock was downgraded to negative from neutral at Susquehanna Financial Group due to higher costs and margin pressure.

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Which economic data were in the spotlight?

The University of Michigan said its consumer-sentiment index in August fell to 95.3, down from 97.9 in July, the lowest level in 11 months. Economists polled by MarketWatch expected a reading of 98.5.

Meanwhile, U.S. leading economic indicators jumped 0.6% in July.

Check out: MarketWatch’s Economic Calendar

What did other markets do?

European stocks were mixed and Asian markets all rose except China’s Shanghai Composite Index SHCOMP, -1.34%  which closed down 1.3%, ending the week down 4.5% and marking the lowest close in nearly two years.

Oil futures CLU8, +0.70%  were higher while gold GCZ8, +0.66%  settled mostly unchanged and the U.S. dollar DXY, -0.48%  fell 0.5%.