S&P 500 posts first 5-day winning streak since September

“The question is whether all of this has already been baked in,” said Quincy Krosby, chief market strategist at Prudential Financial. “If the market can look past this, it will suggest that much of this has been baked in.”

The announcements from Macy’s and American Airlines came as the earnings season for calendar fourth-quarter 2018 is set to ramp up. J.P. Morgan Chase, Bank of America, BlackRock and Morgan Stanley are among the companies set to report next week.

Fourth-quarter earnings are expected to have risen nearly 15 percent on a year-over-year basis, but growth is expected to be much lower moving forward. According to Thomson Reuters, first-quarter earnings are forecast to rise by 3.9 percent.

“Earnings growth has taken a downturn, but it still remains positive,” said Paul Springmeyer, head of investment at U.S. Bank Private Wealth Management. “While the pace of earnings growth is slowing, it is not going negative at this juncture.”

Wall Street weighed the possibility of a prolonged U.S. federal government shutdown. Earlier on Thursday, President Donald Trump tweeted he would skip the annual World Economic Forum in Davos due to the shutdown.

“It’s just a reminder of how utterly dysfunctional the federal government is,” said Ward McCarthy, chief financial economist at Jefferies. “It just means it put potential progress on trade negotiations on the shelf, and the market didn’t like that.”

Delegations from Washington and Beijing ended three days of trade negotiations in China on Wednesday. China’s commerce ministry said Thursday the negotiations were extensive and had helped set up a foundation for further talks. This week’s face-to-face meetings were the first to take place since U.S. President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce last month.

If both sides are unable to secure a comprehensive trade agreement by March 2, Trump has said he plans to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports.

Stocks closed higher on Wednesday. The move higher added to the sharp bounce since the broad index briefly dipped into bear-market territory in late December. Since then, the S&P 500 is up 10 percent through Thursday’s close.

“The power of the recovery rally in US and global equities has been impressive,” Michael Shaoul, chairman and CEO of Marketfield Asset Management, wrote in a note to clients. “As encouraging as all of this has been to witness it does not change the fact that a sell-off of this magnitude does not happen in a vacuum.”

“The decline marks a key downward-shift in the long technology driven bull market,” Shaoul added. “There is simply no way to tell at present whether we have witnessed the completion of a brief but tumultuous sell-off.”

Boeing shares rose more than 2.5 percent after Morgan Stanley upgraded them to overweight, citing strength in the company’s commercial aerospace business.

—CNBC’s
Sam Meredith
contributed to this report.

Source: CNBC