By Akanksha Rana
(Reuters) - U.S. stocks rose on Friday as an easing of trade tensions between the United States and China, and data showing solid domestic consumer spending abated concerns that major economies were on the brink of a recession.
The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% last month after an unrevised 0.3% gain in June.
However, the pace of growth in consumption is unlikely to be sustained amid tepid income gains.
A sharp heightening of tensions this month after the U.S. and China slapped tariffs on each other's goods, caused panic across global markets and resulted in a key part of the U.S. yield curve, a closely-followed recession indicator, inverting.
The two economic superpowers gave signs on Thursday that they will resume trade talks, as the countries discussed the next round of in-person negotiations in September ahead of a looming deadline for additional U.S. tariffs.
That helped Wall Street rise more than 1% on Thursday and set the indexes on pace to post their best weekly gain since June. The benchmark S&P 500 (SPX) index is now 3% off its record high hit in late July.
"It is a continuation of what we saw yesterday and there is optimism that there's going to be some sort of progress, that seems to be the biggest factor," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
Trade sensitive technology (SPLRCT) and industrial stocks (SPLRCI) rose 0.58% and 0.81%, respectively, while chipmakers, which get a major portion of their revenue, jumped.
The Philadelphia chip index (SOX) was up 1.40%.
However, markets are bracing for a new round of U.S. tariffs on some Chinese goods that come into effect on Sunday.
"The market believes that there will be some type of negotiation, but there is real danger this trade conflict is going to last, especially with the magnitude of September tariffs," added Brown.
Hopes that the Federal Reserve would step in to impede any slowdown in economic growth as a result of the trade war, have led traders to fully price in an interest rate cut at the central bank meeting next month.
Investors are now watching out for the monthly jobs report and the manufacturing data next week to gauge the health of the U.S. economy, and gain insight regarding the Fed's path of future interest rate cuts.
At 9:55 a.m. ET the Dow Jones Industrial Average (DJI) was up 122.64 points, or 0.47%, at 26,484.89, the S&P 500 (SPX) was up 12.43 points, or 0.43%, at 2,937.01 and the Nasdaq Composite (IXIC) was up 27.33 points, or 0.34%, at 8,000.72.
Gains in markets were largely broad-based, with the defensive utilities (SPLRCU) and real estate sectors posting the smallest losses.
Ulta Beauty Inc (O:ULTA) tumbled 27.5% to the bottom of the S&P 500 after the cosmetics company cut its full-year profit forecast.
The biggest gainer on the benchmark index was Campbell Soup Co (N:CPB), which rose 6.2% after its quarterly profit beat estimates.
Advancing issues outnumbered decliners for a 2.41-to-1 ratio on the NYSE and a 1.79-to-1 ratio on the Nasdaq.
The S&P index recorded 33 new 52-week highs and no new low, while the Nasdaq recorded 26 new highs and 18 new lows.