KEY POINTS

  • Dow nearly at 29,000 level
  • Apple shares rose 2% on strong iPad sales in China
  • China trade official Liu He to sign trade deal in Washington next week

U.S. stocks surged on Thursday to record highs as investor worries over tensions with Iran abated while looking forward to next week’s signing of a trade deal with China.

The Dow Jones Industrial Average rose 212.35 points 28,957.44 while the S&P 500 gained 21.61 points to 3,274.66 and the Nasdaq Composite Index climbed 74.18 points to 9,203.43.

Volume on the New York Stock Exchange totaled 2.84 billion shares with 1,598 issues advancing, 234 setting new highs, and 1,350 declining, with 13 setting new lows.

Active movers were led by Advanced Micro Devices (AMD), NIO Inc. (NIO) and Snap Inc. (SNAP).

The market enjoyed a ‘relief rally’ after President Donald Trump said Wednesday that Iran is “standing down” after firing missiles at military bases housing U.S. troops in Iraq in retaliation for the killing of Iranian Gen. Qassem Soleimani. Trump also said the U.S. might be open to negotiate with Iran.

China’s Commerce Ministry said Vice Premier Liu He, head of Beijing’s trade negotiating team, will sign a phase one trade deal in Washington next week.

“We do not want to be dismissive of the political ramification of recent events, but we doubt that they will have a long-lasting effect on the trajectory of markets unless matters develop well beyond where they stand today,” said Michael Shaoul, chairman and CEO of Marketfield Asset Management, in a note.

Initial jobless claims dropped by 9,000 to a seasonally adjusted 214,000 for the week ended Jan. 4 – the fourth consecutive weekly decline, the Labor Department said on Thursday.

Chicago Federal Reserve President Charles Evans said on Thursday that the Fed might go the entire year without changing its current stance of monetary policy.

“My expectation is we could go through the entire year without rate changes,” Evans said at a panel discussion in Milwaukee.

St. Louis Federal Reserve President James Bullard, also speaking Thursday, said there is a “reasonable chance” the central bank has enabled a soft landing for the economy.

“Trade regime uncertainty will continue,” he said. “But firms are adjusting business strategies to be profitable even in the face of uncertainty.”

Federal Reserve Vice Chairman Richard Clarida said Thursday morning the central bank is in “a good place” with its monetary policy but remains flexible.

“The shift in the stance of monetary policy that we undertook in 2019 was, I believe, well-timed and has been providing support to the economy and helping to keep the U.S. outlook on track,” he said. “I believe that monetary policy is in a good place and should continue to support sustained growth, a strong labor market, and inflation running close to our symmetric 2% objective.”

But Phil Blancato, CEO of Ladenburg Thalmann, asked investors to be cautious since stock valuations are so high now.

“When you look at last year, you had record returns [in] both the bond and equity market, but all of that was on multiple expansion,” he said. “You had no earnings at all, yet you were up 31% on the S&P 500. “Traditionally, you need earnings to generate returns in the stock market. If you don’t have that, any minor ripple — positive or negative — is going to have a profound effect on the market.”

Erik Bregar, head of foreign exchange strategy at the Exchange Bank of Canada, was also cautious. “There’s a lot of optimism already priced in, but reading between the lines, it feels like a lot can still go wrong,” he said. “In the end, I think we’re a long way from resolution on the big issues.”

Apple (AAPL) shares rose 2.1% to a record high after the Chinese government said iPhone sales jumped 18% in December in the country.

Bed Bath & Beyond (BBBY) plummeted 19.2% after it said it will delay the closure of 20 stores until fiscal 2020.

Overnight in Asia, markets closed broadly higher. China’s Shanghai Composite rose 0.91%, while Hong Kong’s Hang Seng gained 1.68%, and Japan’s Nikkei-225 jumped 2.31%.

In Europe markets closed higher, as Britain’s FTSE-100 rose 0.31%, France’s CAC-40 climbed 0.19% and Germany’s DAX gained 1.31%.

Crude oil futures gained 0.03% at $59.63 per barrel and Brent crude rose 0.07% at $65.44. Gold futures slipped 0.55%.

The euro edged up 0.01% at $1.1105 while the pound sterling slipped 0.24% at $1.3065.

The yield on the 10-year Treasury dropped 0.85% to 1.858% while yield on the 30-year Treasury fell 1.19% to 2.33%.