Stocks surge on optimism about US-China trade talks

Stocks marched higher on Wall Street Friday afternoon, riding investor optimism that the U.S. and China can make progress in their punishing trade war.

The broad rally drove the Dow Jones Industrial Average more than 470 points higher and had the S&P 500 index on track to close out its first weekly gain in four weeks.

Before meeting with Chinese Vice Premier Liu He for trade talks at the White House, President Donald Trump said, "Good things are happening." Investors are hopeful the two sides can reach at least a limited deal on trade and tamp down tensions that have already dragged down manufacturing around the world.

One set of U.S. tariffs is scheduled to rise on Chinese products next week, and another round of tariffs is scheduled to take effect in December. The worry is that all the uncertainty about global trade may spill over into stronger areas of the economy, such as household spending, and cause a recession.

"The market is looking for anything here that shows forward progress," said Ben Phillips, chief investment officer at EventShares. "If we get there, that's enough for the market to say, 'OK, we're moving in the right direction and this isn't going to be a disaster that stops the global expansion.'"

Treasury yields rose as investors felt less need for safety and dumped bonds. The yield on the 10-year Treasury, a benchmark for mortgages and many other kinds of loans, jumped to 1.74% from 1.65% late Thursday, a big move.

The jump in yields helped send bank stocks higher on expectations of bigger profits for making loans. JPMorgan Chase rose 2.7%, and Bank of America climbed 2.5%.

Technology stocks, which often do lots of business with China, also helped power the indexes higher. Apple climbed 2.8%, and Broadcom added 3.1%.

KEEPING SCORE: The S&P 500 index was up 1.7%, as of 3 p.m. Eastern time. Earlier it had been up 1.9%. The Dow climbed 474 points, or 1.8%, to 26,971 after earlier being up nearly 500 points.

The Nasdaq rose 2%. The Russell 2000 index of smaller company stocks outpaced the broader market with a 2.6% gain.

TAMPING DOWN TRADE TENSIONS: Markets around the world have swung sharply on every morsel of progress or dissonance dribbling out about the U.S.-China trade war.

Any breakthrough on trade would mark a sharp turnaround from expectations earlier this week when the U.S. blacklisted a group of Chinese technology companies over alleged human rights violations. China has since signaled that it is open to making even a partial deal.

"It looks like the base case is a truce or a pause for a moment on tariffs," Phillips said.

The Trump administration has already raised tariffs on more than $360 billion worth of Chinese imports, but the stakes have grown. If tariff increases scheduled for this upcoming Tuesday and December go through, they would cover nearly everything China ships to the United States.

EUROPE TOO: Stocks jumped across Europe on hopes that the United Kingdom and European Union can reach a trade deal ahead of London's pending exit from the bloc.

The United Kingdom is set to leave the European Union on Oct. 31, and analysts say a departure without a trade deal in place could rock markets and economies across the region.

The German DAX surged 2.9%, while the CAC 40 in France jumped 1.7%. The FTSE 100 in London rose 0.8%, held back in part by a stronger British pound, which adds pressure on British exporters.

ENERGY: A missile strike on an Iranian tanker revived oil supply concerns and pushed energy prices higher. Benchmark U.S. crude rose 2.1%. Brent crude, used to price international oils, was flat after giving up an early gain.

The explosion follows other attacks earlier this year on tankers in the Persian Gulf, through which about 20% of all oil traded worldwide passes.

The rise in energy prices lifted oil and energy services companies. Exxon rose 1.7% and Schlumberger climbed 5.1%.

TIGHT SCREWS: Fastenal surged 16.7% after the maker of fasteners and other industrial products reported surprisingly good first quarter profit and revenue. The company reported solid growth from its industrial vending and onsite services businesses.

NOT SO GOLDEN: Shares in Newmont Goldcorp was among the biggest decliners in the S&P 500 as gold prices fell 0.8%, reflecting a shift by investors to more risky holdings. The stock slid 3.3%.

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AP Business Writer Damian J. Troise contributed.