The trade war between the world's largest economies has raised prices for consumers and companies. It's also deepened concerns that escalating tariffs could worsen the global economy's slowdown. Even so, investors' jitters over trade and signs of a slowing global economy have been eased by confidence in the prospects for steady U.S. growth and an increasingly hands-off Federal Reserve. That's fueled the market's strong start to this year following its steep sell-off at the end of 2018.
"Clearly, the tariffs negotiations are moving in the right direction, as far as the market is concerned, and that's positive," said Quincy Krosby, chief market strategist at Prudential Financial. "The other positive is that the Fed remains on hold ... and they have been telegraphing that they remain patient on interest rate hikes."
The S&P 500 climbed 19.20 points, or 0.7 percent, to 2,803.69. That's the index's first close above 2,800 points since Nov. 8. The S&P has notched a weekly gain in nine of the past 10 weeks. The Dow Jones Industrial Average rose 110.32 points, or 0.4 percent, to 26,026.32. The Nasdaq composite gained 62.82 points, or 0.8 percent, to 7,595.35. The Russell 2000 index of smaller companies picked up 14.08 points, or 0.9 percent, to 1,589.63. Major indexes in Europe also finished higher.
The U.S. stock indexes got off to a strong start early Friday, then lost ground after a report showed manufacturing growth slowed in February. But that pullback didn't last, a reflection of how traders have remained confident in the strength of the U.S. economy despite weak economic reports.
Consumer spending in December took its biggest tumble in nine years. Disappointing retail sales are another sign that growth slowed at the end of 2018. Optimism over a potential U.S.-China trade deal marked a change from earlier in the week, when U.S. Trade Representative Robert Lighthizer raised doubts about progress in the talks. Speaking to lawmakers, Lighthizer said that much still needed to be done before the sides can reach an agreement over Beijing's technology strategy and other issues.
Washington accuses Beijing of stealing foreign companies' technology or pressuring them to hand it over. President Donald Trump has held off on a threat to impose higher tariffs on $200 billion of Chinese products as negotiations continue.
While the market's recent gains already reflect investors' optimism for a U.S.-China trade deal, stocks could get a further boost from an official resolution to the dispute, said Eric Wiegand, senior portfolio manager for Private Wealth Management at U.S. Bank.
"If we were able to see a successful conclusion to the negotiations that could be a near-term catalyst," he said. Health care and technology companies accounted for much of the market's gains Friday. Celgene rose 3.4 percent, while Western Digital gained 2.7 percent.
A mix of company earnings and deal news also caught investors' attention Friday. Gap surged 16.2 percent after it announced that it will spin off its Old Navy brand into a separate company. The retailer will retain its namesake brand, along with Banana Republic and others, in a new, yet to be named company.
The split comes as Old Navy has thrived while Gap struggles with increasing competition from the likes of Target and Amazon. Several supermarket operators declined after The Wall Street Journal reported that Amazon is planning to open dozens of grocery stores in several U.S. cities. The e-commerce giant has been making a big push into brick-and-mortar stores, buying up the Whole Foods grocery chain in 2017 and opening cashier-less convenience stores around the country.
The news sent Amazon shares 1.9 percent higher. Supermarket operator Kroger slid 4.5 percent. Walmart, which also sells groceries, dropped 1.1 percent. Sprouts Farmers Markets fell 0.5 percent. Investors bid up shares in Foot Locker after the footwear and athletic apparel retailer blew past investor expectations for the fourth quarter and forecast double-digit profit growth for this year. The stock climbed 6 percent.
Tesla tumbled 7.8 percent after CEO Elon Musk said the electric car maker is unlikely to turn a profit in the first quarter. The company also began selling a $35,000 version of its Model 3, which previously cost at least $42,900.
Caesars Entertainment gained 4.1 percent after the casino operator said it will replace three board members with directors chosen by billionaire activist investor Carl Icahn. U.S. crude slid 2.5 percent to settle at $55.80 a barrel in New York. Brent crude, used to price international oils, dropped 1.9 percent to close at $65.07 a barrel in London.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.76 percent from 2.71 percent late Thursday. The dollar rose to 112.01 yen from 111.42 yen on Thursday. The euro weakened to $1.1357 from $1.1379.
Gold fell 1.3 percent to $1,299.20 an ounce. Silver dropped 2.4 percent to $15.26 an ounce. Copper declined 0.5 percent to $2.93 a pound. In other energy futures trading, wholesale gasoline slid 1.3 percent to $1.73 a gallon. Heating oil lost 1.3 percent to $2 a gallon. Natural gas gained 1.7 percent to $2.89 per 1,000 cubic feet.