FILE - In this May 9, 2019, file photo trader Fred DeMarco works on the floor of the New York Stock Exchange. The U.S. stock market opens at 9:30 a.m. EDT on Thursday, May 16. (AP Photo/Richard Drew, File)

Stocks climb for 3rd day in a row, erasing Monday's plunge

May 16, 2019 - 12:58 pm

NEW YORK (AP) — Stocks marched higher for the third day in a row Thursday, erasing the big plunge they took on Monday on worries about the worsening trade fight between China and the U.S.

Banks reversed course and helped lead the broad gains. Banks were benefiting from higher bond yields, which allow them to charge higher interest rates on loans. Bank of America added 1.7% and Citigroup rose 1.9%. Bond yields rose following a surprising rise in new home construction in April.

The steady gains mark a turnaround from Monday, when stocks took a nosedive after Beijing issued retaliatory tariffs on U.S. goods, ratcheting up tensions between the two largest economies in the world.

The S&P 500 and the Nasdaq are now both higher for the week following steep drops on Monday. The Dow Jones Industrial Average is nearly back to breakeven.

Technology stocks were also big gainers. The sector, which is highly exposed to trade tensions with China, has been volatile all week. Microsoft added 2.6%.

Utilities and real estate companies lagged the market, another sign that investors were becoming more comfortable holding riskier assets.

KEEPING SCORE: The S&P 500 index rose 1.2% as of 1 p.m. Eastern Time. The Dow Jones Industrial Average rose 257 points, or 1%, to 25,903 points. The Nasdaq composite rose 1.2%.

ANALYST'S TAKE: Investors are relieved the U.S. isn't expanding its trade war to several new fronts, for now. U.S. officials have reportedly backed off of raising tariffs on auto imports from Europe and are making progress on lifting steel tariffs in North America.

"Clearly, the market is at the mercy of what we're hearing on trade," said Liz Ann Sonders, chief investment strategist at Charles Schwab.

A dose of solid economic data with the home construction report Thursday also helped stem what had been a flow of weak economic data, she said. Still, she said the market will likely remain volatile until investors can get a better sense of how the U.S. and China will resolve their trade dispute.

GOOD CONNECTION: Cisco jumped 6.9% after the company beat Wall Street's fiscal third quarter earnings forecasts. The maker of gear that connects computers also issued a solid forecast for the current quarter. The company said it has factored in the escalating trade war between the U.S. and China and sees "very minimal impact" ahead.

WALMART WHIPS GROWTH: Walmart rose 2.5% after reporting a surge in a key sales measure, driven by a growing grocery sales business. The company also said online sales rose 37%.

The world's largest retailer also beat Wall Street's profit forecasts for the first quarter. The company has been working to get more people into its stores and use its online shopping service. It recently launched next-day delivery as it faces tougher competition from other retailers and Amazon.

BANKS BOUNCE BACK: Banks and other financial services companies all moved higher after solid housing data helped nudge bond yields higher. The yield on the 10 year Treasury rose to 2.40%.

JPMorgan Chase rose 1.8%, American Express rose 1.3% and M&T Bank rose 1.8%.

The higher yields follow the Commerce Department's report that U.S. home construction rose faster than expected by economists in April. The solid report follows a series of weak economic reports on Wednesday that shoved bond yields sharply lower and weighed down the entire financial sector.

Higher yields allow banks to charge higher interest on loans.

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